~~0000898174 us-gaap:CorporateDebtSecuritiesMember us-gaap:InterestIncomeMember 2019-04-01 2019-06-30~~0000898174srt:AMBestAPlusRatingMemberrga:ReinsurerEMember2020-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-11848

REINSURANCE GROUP OF AMERICA, INCORPORATED

(Exact name of Registrant as specified in its charter)



Missouri						43-1627032
(State or other jurisdiction						(IRS employer
of incorporation or organization)						identification number)

16600 Swingley Ridge Road

Chesterfield,, Missouri63017

(Address of principal executive offices)

(~~636~~) (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 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 ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Securities 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 ~~July 31, 2020, 67,935,859~~April 30, 2021, 67,985,243 shares of the registrant’s common stock were outstanding.

Table of Contents

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS


Item		Page

	PART I – FINANCIAL INFORMATION

1	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) March 31, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Income (Unaudited) Three months ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three months ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Three months ended March 31, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31, 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	21
	6. Fair Value of Assets and Liabilities	25
	7. Segment Information	30
	8. Commitments, Contingencies and Guarantees	32
	9. Income Tax	33
	10. Employee Benefit Plans	33
	11. Reinsurance	34
	12. Policy Claims and Benefits	34
	13. New Accounting Standards	35
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
3	Quantitative and Qualitative Disclosure About Market Risk	64
4	Controls and Procedures	64

	PART II – OTHER INFORMATION

1	Legal Proceedings	65
1A	Risk Factors	65
2	Unregistered Sales of Equity Securities and Use of Proceeds	65
6	Exhibits	65
	Index to Exhibits	66
	Signatures	68

Item       Page

   PART I – FINANCIAL INFORMATION

1
Financial Statements


Condensed Consolidated Balance Sheets (Unaudited)
June 30, 2020 and December 31, 2019

3

Condensed Consolidated Statements of Income (Unaudited)
Three and six months ended June 30, 2020 and 2019

4

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Three and six months ended June 30, 2020 and 2019

5

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
Three and six months ended June 30, 2020 and 2019

6

Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30, 2020 and 2019

7

Notes to Condensed Consolidated Financial Statements (Unaudited):

8

     1. Business and Basis of Presentation

8

     2. Earnings Per Share

10

     3. Equity

10

     4. Investments

13

     5. Derivative Instruments

22

     6. Fair Value of Assets and Liabilities

28

     7. Segment Information

36

     8. Commitments, Contingencies and Guarantees

38

     9. Income Tax

40

     10. Employee Benefit Plans

40

     11. Reinsurance

41

     12. Policy Claims and Benefits

41

     13. Financing Activities

42

     14. New Accounting Standards

42
2
Management’s Discussion and Analysis of
Financial Condition and Results of Operations

45
3
Quantitative and Qualitative Disclosures About Market Risk

75
4
Controls and Procedures

75

   PART II – OTHER INFORMATION

1
Legal Proceedings

76
1A
Risk Factors

77
2
Unregistered Sales of Equity Securities and Use of Proceeds

80
6
Exhibits

80

Index to Exhibits

81

Signatures

82

Table of Contents

PART I - FINANCIAL INFORMATION

~~ITEM 1. Financial Statements~~

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

(Unaudited)


	June 30, 2020			December 31, 2019
	(Dollars in millions, except share data)							March 31, 2021		December 31, 2020
Assets							Assets
Fixed maturity securities available-for-sale, at fair value (amortized cost $46,903 and $46,753; allowance for credit losses of $33 at June 30, 2020)	$	52,346		$	51,121
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,229 and $49,548; allowance for credit losses of $22 and $20)							Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,229 and $49,548; allowance for credit losses of $22 and $20)	$	56,426	$	56,735
Equity securities, at fair value	130			320			Equity securities, at fair value	135		132
Mortgage loans on real estate (net of allowances of $56 and $12)	5,974			5,706
Mortgage loans on real estate (net of allowances of $47 and $64)							Mortgage loans on real estate (net of allowances of $47 and $64)	6,001		5,787
Policy loans	1,310			1,319			Policy loans	1,253		1,258
Funds withheld at interest	5,250			5,662			Funds withheld at interest	5,459		5,432
Short-term investments	84			64			Short-term investments	157		227
Other invested assets	2,547			2,363			Other invested assets	2,983		2,829
Total investments	67,641			66,555			Total investments	72,414		72,400
Cash and cash equivalents	4,313			1,449			Cash and cash equivalents	3,122		3,408
Accrued investment income	494			493			Accrued investment income	546		511
Premiums receivable and other reinsurance balances	2,852			2,940			Premiums receivable and other reinsurance balances	2,907		2,842
Reinsurance ceded receivables	945			904			Reinsurance ceded receivables	1,089		983
Deferred policy acquisition costs	3,565			3,512			Deferred policy acquisition costs	3,617		3,616
Other assets	919			878			Other assets	1,115		896
Total assets	$	80,729		$	76,731		Total assets	$	84,810	$	84,656
Liabilities and Stockholders’ Equity							Liabilities and Stockholders’ Equity
Future policy benefits	$	29,897		$	28,672		Future policy benefits	$	33,675	$	31,453
Interest-sensitive contract liabilities	23,118			22,711			Interest-sensitive contract liabilities	23,142		23,276
Other policy claims and benefits	6,232			5,711			Other policy claims and benefits	7,077		6,413
Other reinsurance balances	510			557			Other reinsurance balances	560		598
Deferred income taxes	2,856			2,712			Deferred income taxes	2,417		3,263
Other liabilities	1,557			1,188			Other liabilities	1,930		1,340

Long-term debt	3,573			2,981			Long-term debt	3,573		3,573
Collateral finance and securitization notes	433			598			Collateral finance and securitization notes	346		388
Total liabilities	68,176			65,130			Total liabilities	72,720		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	—			—			Preferred stock – par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstanding	0		0
Common stock – par value $.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at June 30, 2020 and 79,137,758 shares issued at December 31, 2019	1			1
Additional paid-in capital	2,413			1,937
Common stock – par value $.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at March 31, 2021 and December 31, 2020							Common stock – par value $.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at March 31, 2021 and December 31, 2020	1		1
Additional paid-in-capital							Additional paid-in-capital	2,411		2,406
Retained earnings	7,901			7,952			Retained earnings	8,235		8,148
Treasury stock, at cost – 17,374,739 and 16,481,656 shares	(1,563		)	(1,426		)
Treasury stock, at cost – 17,325,355 and 17,353,697 shares							Treasury stock, at cost – 17,325,355 and 17,353,697 shares	(1,559)		(1,562)
Accumulated other comprehensive income	3,801			3,137			Accumulated other comprehensive income	3,002		5,359
Total stockholders’ equity	12,553			11,601			Total stockholders’ equity	12,090		14,352
Total liabilities and stockholders’ equity	$	80,729		$	76,731		Total liabilities and stockholders’ equity	$	84,810	$	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

(in millions, except per share amounts)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,							Three months ended March 31,
	2020		2019		2020			2019					2021		2020
Revenues:	(Dollars in millions, except per share data)										Revenues:
Net premiums	$	2,790	$	2,764	$	5,609		$	5,502		Net premiums		$	2,914	$	2,819
Investment income, net of related expenses	645		584		1,239			1,164			Investment income, net of related expenses		812		594
Investment related gains (losses), net:											Investment related gains (losses), net:
Impairments and change in allowance for credit losses on fixed maturity securities	—		—		(34		)	(9		)	Impairments and change in allowance for credit losses on fixed maturity securities		(2)		(34)

Other investment related gains (losses), net	81		12		(170		)	29			Other investment related gains (losses), net		304		(251)
Total investment related gains (losses), net	81		12		(204		)	20			Total investment related gains (losses), net		302		(285)
Other revenues	90		107		166			201			Other revenues		91		76
Total revenues	3,606		3,467		6,810			6,887			Total revenues		4,119		3,204
Benefits and Expenses:											Benefits and Expenses:
Claims and other policy benefits	2,700		2,516		5,364			5,024			Claims and other policy benefits		3,192		2,664
Interest credited	187		158		333			291			Interest credited		146		146
Policy acquisition costs and other insurance expenses	290		260		538			572			Policy acquisition costs and other insurance expenses		333		248
Other operating expenses	188		222		383			424			Other operating expenses		214		195
Interest expense	42		43		83			83			Interest expense		45		41
Collateral finance and securitization expense	4		8		10			16			Collateral finance and securitization expense		3		6
Total benefits and expenses	3,411		3,207		6,711			6,410			Total benefits and expenses		3,933		3,300
Income before income taxes	195		260		99			477
Income (loss) before income taxes											Income (loss) before income taxes		186		(96)
Provision for income taxes	37		58		29			105			Provision for income taxes		47		(8)
Net income	$	158	$	202	$	70		$	372
Net income (loss)											Net income (loss)		$	139	$	(88)
Earnings per share:											Earnings per share:
Basic earnings per share	$	2.49	$	3.23	$	1.12		$	5.93		Basic earnings per share		$	2.04	$	(1.41)
Diluted earnings per share	$	2.48	$	3.18	$	1.11		$	5.83		Diluted earnings per share		$	2.03	$	(1.41)

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

(in millions)

(Unaudited)


	Three months ended June 30,					Six months ended June 30,						Three months ended March 31,
	2020			2019		2020			2019				2021		2020
Comprehensive income (loss)	(Dollars in millions)										Comprehensive income (loss)
Net income	$	158		$	202	$	70		$	372
Net income (loss)											Net income (loss)		$	139	$	(88)
Other comprehensive income (loss), net of tax:											Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	13			25		(118		)	46		Foreign currency translation adjustments		30		(131)
Net unrealized investment gains (losses)	2,663			851		790			1,960		Net unrealized investment gains (losses)		(2,387)		(1,873)

Defined benefit pension and postretirement plan adjustments	(5		)	—		(8		)	—		Defined benefit pension and postretirement plan adjustments		0		(3)
Total other comprehensive income (loss), net of tax	2,671			876		664			2,006		Total other comprehensive income (loss), net of tax		(2,357)		(2,007)
Total comprehensive income (loss)	$	2,829		$	1,078	$	734		$	2,378	Total comprehensive income (loss)		$	(2,218)	$	(2,095)

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

Table of Contents

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions except per share amounts)

(Unaudited)


																		Common Stock		Additional Paid In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total
	Three months ended June 30, 2020 and 2019
	Common Stock		Additional Paid In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income		Total
Balance, March 31, 2020	$	1	$	1,942		$	7,802		$	(1,574	)	$	1,130	9,301
Balance, December 31, 2020																	Balance, December 31, 2020	$	1	$	2,406	$	8,148	$	(1,562)	$	5,359	$	14,352
Adoption of new accounting standards																	Adoption of new accounting standards											0
Net income						158								158			Net income					139						139
Total other comprehensive income (loss)												2,671		2,671			Total other comprehensive income (loss)									(2,357)		(2,357)
Dividends to stockholders, $0.70 per share						(43		)						(43		)	Dividends to stockholders, $0.70 per share					(48)						(48)
Issuance of common stock, net of expenses			481											481
Purchase of treasury stock									(6		)			(6		)	Purchase of treasury stock							(1)				(1)
Reissuance of treasury stock			(10		)	(16		)	17					(9		)	Reissuance of treasury stock			5		(4)		4				5
Balance, June 30, 2020	$	1	$	2,413		$	7,901		$	(1,563	)	$	3,801	$	12,553
Balance, March 31, 2021																	Balance, March 31, 2021	$	1	$	2,411	$	8,235	$	(1,559)	$	3,002	$	12,090

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

(in millions)

(Unaudited)


	Six months ended June 30,							Three months ended March 31,
	2020			2019				2021		2020
	(Dollars in millions)
Cash Flows from Operating Activities:							Cash Flows from Operating Activities:
Net income	$	70		$	372
Net income (loss)							Net income (loss)	$	139	$	(88)
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Change in operating assets and liabilities:							Change in operating assets and liabilities:
Accrued investment income	(9		)	(12		)	Accrued investment income	(35)		(27)
Premiums receivable and other reinsurance balances	24			85			Premiums receivable and other reinsurance balances	(93)		2
Deferred policy acquisition costs	(107		)	(115		)	Deferred policy acquisition costs	7		(88)
Reinsurance ceded receivable balances	(32		)	(109		)	Reinsurance ceded receivable balances	(99)		39
Future policy benefits, other policy claims and benefits, and other reinsurance balances	2,360			736			Future policy benefits, other policy claims and benefits, and other reinsurance balances	3,064		2,051
Deferred income taxes	(88		)	92			Deferred income taxes	(195)		(67)
Other assets and other liabilities, net	38			(122		)	Other assets and other liabilities, net	37		(57)
Amortization of net investment premiums, discounts and other	(24		)	(34		)	Amortization of net investment premiums, discounts and other	(12)		(12)
Depreciation and amortization expense	23			22			Depreciation and amortization expense	11		4
Investment related (gains) losses, net	204			(20		)	Investment related (gains) losses, net	(302)		285

Other, net	120			75			Other, net	(156)		165
Net cash provided by operating activities	2,579			970			Net cash provided by operating activities	2,366		2,207
Cash Flows from Investing Activities:							Cash Flows from Investing Activities:
Sales of fixed maturity securities available-for-sale	3,835			5,097			Sales of fixed maturity securities available-for-sale	2,738		2,141
Maturities of fixed maturity securities available-for-sale	406			439			Maturities of fixed maturity securities available-for-sale	216		283
Sales of equity securities	180			—			Sales of equity securities	1		177
Principal payments and sales of mortgage loans on real estate	283			166
Principal payments on mortgage loans on real estate							Principal payments on mortgage loans on real estate	164		189
Principal payments on policy loans	15			44			Principal payments on policy loans	10		4
Purchases of fixed maturity securities available-for-sale	(4,875		)	(5,689		)	Purchases of fixed maturity securities available-for-sale	(5,293)		(3,157)
Purchases of equity securities	(21		)	(57		)	Purchases of equity securities	0		(15)
Cash invested in mortgage loans on real estate	(604		)	(598		)	Cash invested in mortgage loans on real estate	(356)		(541)

Cash invested in policy loans	(6		)	(5		)	Cash invested in policy loans	(4)		0
Cash invested in funds withheld at interest	(49		)	(54		)
Purchase of businesses, net of cash acquired of $27	—			4
Cash invested in funds withheld at interest, net							Cash invested in funds withheld at interest, net	(26)		(17)
Purchases of property and equipment	(11		)	(18		)	Purchases of property and equipment	(4)		(6)

Change in short-term investments	(19		)	67			Change in short-term investments	64		(58)
Change in other invested assets	(158		)	(160		)	Change in other invested assets	(2)		(96)
Net cash used in investing activities	(1,024		)	(764		)	Net cash used in investing activities	(2,492)		(1,096)
Cash Flows from Financing Activities:							Cash Flows from Financing Activities:
Dividends to stockholders	(87		)	(75		)	Dividends to stockholders	(48)		(44)
Proceeds from issuance of common stock, net	481			—
Repayment of collateral finance and securitization notes	(160		)	(53		)	Repayment of collateral finance and securitization notes	(42)		(19)
Proceeds from long-term debt issuance	598			599
Debt issuance costs	(5		)	(5		)

Principal payments of long-term debt	(1		)	(1		)	Principal payments of long-term debt	(1)		(1)
Purchases of treasury stock	(162		)	(68		)	Purchases of treasury stock	(1)		(156)

Exercise of stock options, net	1			2			Exercise of stock options, net	0		1
Change in cash collateral for derivative positions and other arrangements	93			(80		)	Change in cash collateral for derivative positions and other arrangements	(25)		51
Deposits on universal life and other investment type policies and contracts	1,004			256			Deposits on universal life and other investment type policies and contracts	255		663
Withdrawals on universal life and other investment type policies and contracts	(429		)	(390		)	Withdrawals on universal life and other investment type policies and contracts	(281)		(188)
Net cash provided by financing activities	1,333			185
Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities	(143)		307
Effect of exchange rate changes on cash	(24		)	7			Effect of exchange rate changes on cash	(17)		(47)
Change in cash and cash equivalents	2,864			398			Change in cash and cash equivalents	(286)		1,371
Cash and cash equivalents, beginning of period	1,449			1,890			Cash and cash equivalents, beginning of period	3,408		1,449
Cash and cash equivalents, end of period	$	4,313		$	2,288		Cash and cash equivalents, end of period	$	3,122	$	2,820
Supplemental disclosures of cash flow information:							Supplemental disclosures of cash flow information:
Interest paid	$	80		$	86		Interest paid	$	36	$	39
Income taxes (received) paid, net of refunds	$	(12	)	$	23
Non-cash investing activities:
Transfer of invested assets	$	—		$	3,421
Right-of-use assets acquired through operating leases	$	—		$	1
Purchase of businesses:
Assets acquired, excluding cash acquired	$	—		$	8
Liabilities assumed	—			(12		)
Net cash received on purchase	$	—		$	(4	)
Income taxes paid (received), net of refunds							Income taxes paid (received), net of refunds	$	61	$	(31)

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. 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 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 and should be read in conjunction with the Company’s ~~2019~~2020 Annual Report on Form 10-K filed with the SEC on February ~~27, 2020~~26, 2021 (the ~~“2019~~“2020 Annual Report”).

In the opinion of management, all adjustments, including normal recurring adjustments necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~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. Entities in which the Company has significant influence over the operating and financing decisions but are not required to be consolidated are reported under the equity method of accounting.

~~Significant Accounting Policies~~ – ~~Update~~

The Company’s significant accounting policies are discussed in Note 2 – “Significant Accounting Policies and Pronouncements” of the 2019 Annual Report. The significant accounting policies discussed below reflect the impact of the adoption of ~~Financial Instruments - Credit Losses~~ ~~on January 1, 2020.~~2. Earnings Per Share

~~Allowance for Credit Losses and Impairments – Fixed Maturity Securities Available-for-Sale~~

Beginning on January 1, 2020, credit losses are recognized through an allowance account. The Company identifies fixed maturity securities that could potentially have an allowance for credit losses by monitoring market events that could impact issuers’ credit ratings, business climates, management changes, litigation, government actions and other similar factors. The Company also monitors late payments, pricing levels, rating agency actions, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.

The Company reviews all securities on a case-by-case basis to determine whether a decline in value exists and whether an allowance for credit losses or impairment for non-credit losses should be recognized. The Company considers relevant facts and circumstances in evaluating whether a security is impaired due to credit or non-credit components. Relevant facts and circumstances considered include: (1) the reasons for the decline in fair value; (2) the issuer’s financial position and access to capital; and (3) the Company’s intent to sell a security or whether it is more likely than not it will be required to sell the security before the recovery of its amortized cost that, in some cases, may extend to maturity. To the extent the Company determines a security is deemed to be impaired, an allowance is recorded for credit losses and an impairment loss is recognized in accumulated other comprehensive income (“AOCI”) for non-credit losses.

Impairment losses on fixed maturity securities recognized in the financial statements are dependent on the facts and circumstances related to the specific security. If the Company intends to sell a security or it is more likely than not that it would be required to sell a security before the recovery of its amortized cost, less any recorded credit loss, it recognizes an impairment loss in investment related gains (losses), net on the condensed consolidated statements of income for the difference between amortized cost and fair value.

The Company estimates the amount of the credit loss component of a fixed maturity security impairment as the difference between amortized cost and the present value of the expected cash flows of the security. The Company excludes accrued interest from the amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to

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accrete an asset-backed or floating rate security. The techniques and assumptions for establishing the best estimate cash flows vary depending on the type of security. The asset-backed securities’ cash flow estimates are based on security-specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate fixed maturity security cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using security specific facts and circumstances including timing, security interests and loss severity.

The Company writes off uncollectible fixed maturity securities when (1) it has sufficient information to determine that the issuer of the security is insolvent or (2) it has received notice that the issuer of the security has filed for bankruptcy, and the collectability of the asset is expected to be adversely impacted by the bankruptcy.

In periods after an impairment loss is recognized for non-credit loss components on a fixed maturity security, the Company will report the impaired security as if it had been purchased on the date it was impaired and will continue to estimate the present value of the estimated cash flows of the security. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted into net investment income over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows.

~~Impairments – Other Invested Assets~~

The Company considers its cost method investments for impairment when the carrying value of these investments exceeds the net asset value. The Company takes into consideration the severity and duration of this excess when deciding if the cost method investment is impaired. For equity method investments (including real estate joint ventures), the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred.

~~Mortgage Loans on Real Estate~~

Mortgage loans on real estate are carried at unpaid principal balances, net of any unamortized premium or discount and valuation allowances. Interest income is accrued on the principal amount of the mortgage loan based on its contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. The Company accrues interest on loans until it is probable the Company will not receive interest, or the loan is 90 days past due. Interest income, amortization of premiums, accretion of discounts and prepayment fees are reported in investment income, net of related expenses in the condensed consolidated statements of income.

Valuation allowances on mortgage loans are computed on an expected loss basis using a model that utilizes probability of default and loss given default methods over the lifetime of the loan. Accrued interest is excluded from the calculation of valuation allowances. Within the reasonable and supportable forecast period (i.e. typically two years), valuation allowances for mortgage loans are established based on several pool-level loan assumptions, defaults and loss severity, loss expectations for loans with similar risk characteristics and industry statistics. These evaluations are revised as conditions change and new information becomes available. The model also includes the impact of expected changes in future macro-economic conditions. The Company reverts to historical loss information for periods beyond which it believes it is able to develop or obtain reasonable and supportable forecasts of future economic conditions.

A mortgage loan is considered to be impaired when, based on the current information and events, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the mortgage agreement. Although all available and applicable factors are considered in the Company’s analysis, loan-to-value and debt service coverage ratios are the most critical factors in determining impairment. Impairments are based on the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan’s original effective interest rate, the value of the loan’s collateral if the loan is in the process of foreclosure or is otherwise collateral-dependent, or the loan’s market value if the loan is being sold.

Any interest accrued or received on the net carrying amount of the impaired loan will be included in investment income or applied to the principal of the loan, depending on the assessment of the collectability of the loan. Mortgage loans deemed to be uncollectible or that have been foreclosed are charged off against the valuation allowances and subsequent recoveries, if any, are credited to the valuation allowances. Changes in valuation allowances are reported in investment related gains (losses), net on the condensed consolidated statements of income.

The Company evaluates whether a mortgage loan modification represents a troubled debt restructuring. In a troubled debt restructuring, the Company grants concessions related to the borrower’s financial difficulties. Generally, the types of concessions include: reduction of the contractual interest rate, extension of the maturity date at an interest rate lower than current market interest rates and/or a reduction of accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. Through the continuous monitoring process, the Company may have recorded a specific valuation allowance prior to when the mortgage loan is modified in a troubled debt restructuring. Accordingly, the carrying value (after specific valuation

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allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment.


2.	~~Earnings Per Share~~

The following table sets forth the computation of basic and diluted earnings per share on net income (in millions, except per share information):


	Three months ended March 31,
		2021		2020
Earnings:
Net income (loss)		$	139	$	(88)
Shares:
Weighted average outstanding shares		68		62
Equivalent shares from outstanding stock awards		0		1
Denominator for diluted calculation		68		63
Earnings per share:
Basic		$	2.04	$	(1.41)
Diluted		$	2.03	$	(1.41)

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Earnings:
Net income $ 158
$ 202
$ 70
$ 372
Shares:
Weighted average outstanding shares 63
63
63
63
Equivalent shares from outstanding stock options 1
1
1
1
Denominator for diluted calculation 64
64
64
64
Earnings per share:
Basic $ 2.49
$ 3.23
$ 1.12
$ 5.93
Diluted $ 2.48
$ 3.18
$ 1.11
$ 5.83

As a result of the net loss for the three months ended March 31, 2020, the Company is required to use basic weighted average common shares outstanding of 62 million in the calculation of diluted loss per share, since the inclusion of shares for outstanding stock awards of 1 million would have been anti-dilutive to the loss per share calculations. In the absence of the losses, weighted average common shares outstanding and dilutive potential common shares would have totaled 63 million.

The calculation of common equivalent shares does not include the impact of ~~options~~stock appreciation rights having a strike or conversion price that exceeds the average stock price for the earnings period, as the result would be anti-dilutive. The calculation of common equivalent shares also excludes the impact of outstanding performance contingent ~~shares,~~awards, as the conditions necessary for their issuance have not been satisfied as of the end of the reporting period. The following table presents approximate amounts of stock ~~options~~appreciation rights and performance contingent ~~shares~~awards excluded from the calculation of common equivalent shares (in thousands):

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Excluded from common equivalent shares:
Stock options 1,638
250
1,200
420
Performance contingent shares 96
242
130
171

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	Three months ended March 31,
	2021	2020
Excluded from common equivalent shares:
Stock appreciation rights	1,248	1,060
Performance contingent awards	291	150


3.	3. Equity

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

Common ~~Stock~~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


Stock-based compensation (1)	0	(28,342)	28,342
Balance, March 31, 2021	85,310,598	17,325,355	67,985,243

Issued Held In Treasury Outstanding
Balance, December 31, 2019 79,137,758
16,481,656
62,656,102
Issuance of common stock 6,172,840
—
6,172,840
Common stock acquired —
1,074,413
(1,074,413 )
Stock-based compensation ⁽¹⁾
—
(181,330 ) 181,330
Balance, June 30, 2020 85,310,598
17,374,739
67,935,859


	Issued	Held In Treasury	Outstanding
Balance, December 31, 2019	79,137,758	16,481,656	62,656,102
Common Stock acquired	0	1,074,413	(1,074,413)
Stock-based compensation (1)	0	(64,654)	64,654
Balance, March 31, 2020	79,137,758	17,491,415	61,646,343

Issued Held In Treasury Outstanding
Balance, December 31, 2018 79,137,758
16,323,390
62,814,368
Common stock acquired —
344,237
(344,237 )
Stock-based compensation ⁽¹⁾
—
(288,360 ) 288,360
Balance, June 30, 2019 79,137,758
16,379,267
62,758,491


~~(1)~~	~~Represents net shares issued from treasury pursuant to the Company’s equity-based compensation programs.~~

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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.

InOn January 24, 2019, RGA’s board of directors authorized a share repurchase program for up to $400 million of RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. ~~During~~In connection with this new authorization, the ~~first six months~~board of ~~2020, RGA repurchased 1,074,413 shares of common~~directors terminated the stock ~~under this program for $153 million. During the first six months of 2019, RGA repurchased 344,237 shares of common stock under this program for $50 million.~~repurchase authority granted in 2017. On May 6, 2020, the Company announced that it has suspended stock repurchases until further notice. The resumption and pace of repurchase activity depends on various factors such as the level of available cash, the impact of the ongoing COVID-19 pandemic, an evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in force reinsurance transactions, and RGA’s stock price. During the three months ended March 31, 2021, RGA did not repurchase any shares of common stock under this program. During the three months ended March 31, 2020, RGA repurchased 1 million shares of common stock under this program for $153 million.

Accumulated Other Comprehensive Income (Loss)

The balance of and changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ are as follows (dollars in millions):


														Accumulated Other Comprehensive Income (Loss), Net of Income Tax
	Accumulated Currency Translation Adjustments			Unrealized Appreciation (Depreciation) of Investments⁽¹⁾			Pension and Postretirement Benefits			Total				Accumulated Currency Translation Adjustments		Unrealized Appreciation (Depreciation) of Investments(1)		Pension and Postretirement Benefits		Total
Balance, December 31, 2019	$	(92	)	$	3,299		$	(70	)	$	3,137
Balance, December 31, 2020													Balance, December 31, 2020	$	(69)	$	5,500	$	(72)	$	5,359
Other comprehensive income (loss) before reclassifications	(116		)	1,034			(12		)	906			Other comprehensive income (loss) before reclassifications	35		(2,947)		(1)		(2,913)
Amounts reclassified to (from) AOCI	—			—			2			2			Amounts reclassified to (from) AOCI	0		(113)		1		(112)
Deferred income tax benefit (expense)	(2		)	(244		)	2			(244		)	Deferred income tax benefit (expense)	(5)		673		0		668
Balance, June 30, 2020	$	(210	)	$	4,089		$	(78	)	$	3,801
Balance, March 31, 2021													Balance, March 31, 2021	$	(39)	$	3,113	$	(72)	$	3,002

Accumulated
Currency
Translation
Adjustments

Unrealized
Appreciation
(Depreciation)
of Investments⁽¹⁾

Pension and
Postretirement
Benefits
Total
Balance, December 31, 2018 $ (169 ) $ 856
$ (51 ) $ 636
Other comprehensive income (loss) before reclassifications 44
2,617
(3 ) 2,658
Amounts reclassified to (from) AOCI —
(98 ) 3
(95 )
Deferred income tax benefit (expense) 2
(559 ) —
(557 )
Balance, June 30, 2019 $ (123 ) $ 2,816
$ (51 ) $ 2,642


~~(1)~~	Includes cash flow hedges of $(74) and $(26) as of June 30, 2020 and December 31, 2019, respectively, and $(15) and $9 as of June 30, 2019 and December 31, 2018, respectively. See Note 5 – “Derivative Instruments” for additional information on cash flow hedges.

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	Accumulated Other Comprehensive Income (Loss), Net of Income Tax
	Accumulated Currency Translation Adjustments		Unrealized Appreciation (Depreciation) of Investments(1)		Pension and Postretirement Benefits		Total
Balance, December 31, 2019	$	(92)	$	3,299	$	(70)	$	3,137
Other comprehensive income (loss) before reclassifications	(112)		(2,496)		(5)		(2,613)
Amounts reclassified to (from) AOCI	0		141		1		142
Deferred income tax benefit (expense)	(19)		482		1		464
Balance, March 31, 2020	$	(223)	$	1,426	$	(73)	$	1,130

(1)Includes cash flow hedges of $(71) and $(49) as of March 31, 2021 and December 31, 2020, respectively, and $(87) and $(26) as of March 31, 2020 and December 31, 2019, respectively. See Note 5 – “Derivative Instruments” for additional information on cash flow hedges.

The following table presents the amounts of AOCI reclassifications for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (dollars in millions):


		Amount Reclassified from AOCI
	Three months ended March 31,			Affected Line Item in Statement of Income
Details about AOCI Components		2021				2020
Net unrealized investment gains (losses):
Net unrealized gains (losses) on available-for-sale securities		$	157	$	(39)		Investment related gains (losses), net
Cash flow hedges – Interest rate		0		0			(1)
Cash flow hedges – Currency/Interest rate		(2)		0			(1)

Deferred policy acquisition costs attributed to unrealized gains and losses		(42)		(102)			(2)
Total		113		(141)
Provision for income taxes		(24)		27
Net unrealized gains (losses), net of tax		$	89	$	(114)
Amortization of defined benefit plan items:
Prior service cost (credit)		$	0	$	0		(3)
Actuarial gains (losses)		(1)		(1)			(3)
Total		(1)		(1)
Provision for income taxes		0		0
Amortization of defined benefit plans, net of tax		$	(1)	$	(1)

Total reclassifications for the period		$	88	$	(115)

Amount Reclassified from AOCI
Three months ended June 30, Six months ended June 30,
Details about AOCI Components 2020 2019 2020 2019
Affected Line Item in
Statements of Income
Net unrealized investment gains (losses):
Net unrealized gains (losses) on available-for-sale securities $ 11
$ 20
$ (28 ) $ 20
Investment related gains (losses), net
Cash flow hedges – Interest rate (1 ) —
(1 ) 1
(1)
Cash flow hedges – Currency/Interest rate —
—
—
—
(1)
Deferred policy acquisition costs attributed to unrealized gains and losses 131
63
29
77
(2)
Total 141
83
—
98

Provision for income taxes (29 ) (17 ) (2 ) (20 )
Net unrealized gains (losses), net of tax $ 112
$ 66
$ (2 ) $ 78

Amortization of defined benefit plan items:
Prior service (cost) credit $ 1
$ 1
$ 1
$ 1
(3)
Actuarial gains (losses) (2 ) (1 ) (3 ) (3 ) (3)
Total (1 ) —
(2 ) (2 )
Provision for income taxes —
—
—
1

Amortization of defined benefit plans, net of tax $ (1 ) $ —
$ (2 ) $ (1 )

Total reclassifications for the period $ 111
$ 66
$ (4 ) $ 77


~~(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 2019 Annual Report for additional details.~~


~~(3)~~	~~This AOCI component is included in the computation of the net periodic benefit 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 ~~$(5)~~$5 million for the three months ended March 31, 2021 and ~~$21 million in the first six months of 2020 and 2019, respectively.~~2020. In the first quarter of ~~2020,~~2021, the Company granted ~~456,301~~200,201 stock appreciation rights at ~~$117.85~~$129.01 weighted average exercise price per share, ~~175,047~~167,862 performance contingent ~~units~~awards and ~~30,129~~328,725 restricted stock units to employees. ~~Additionally, non-employee directors were granted a total of 16,665~~Performance contingent awards include both performance contingent shares ~~of common stock.~~and performance share units. As of ~~June 30, 2020, 1,267,427~~March 31, 2021, 1,644,630 share ~~options~~awards at a weighted average strike price per share of ~~$87.69~~$96.71 were vested and exercisable, with a remaining weighted average exercise period of ~~4.4~~4.6 years. As of ~~June 30, 2020,~~March 31, 2021, the total compensation cost of non-vested awards not yet recognized in the condensed consolidated financial statements was ~~$29~~$73 million. It is estimated that these costs will vest over a weighted average period of ~~1.0~~1.2 years.

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4. Investments


4.	~~Investments~~

Fixed Maturity Securities Available-for-Sale

The Company holds various types of fixed maturity securities available-for-sale and classifies them as corporate securities (“Corporate”), Canadian and Canadian provincial government securities (“Canadian government”), residential mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”), U.S. government and agencies (“U.S. government”), state and political subdivisions, and other foreign government, supranational and foreign government-sponsored enterprises (“Other foreign government”). RMBS, ABS and CMBS are collectively “structured securities.”

The following tables provide information relating to investments in fixed maturity securities by type as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):


March 31, 2021:	Amortized		Allowance for		Unrealized		Unrealized		Estimated Fair		% of
	Cost		Credit Losses		Gains		Losses		Value		Total
Available-for-sale:
Corporate	$	32,916	$	16	$	2,683	$	288	$	35,295	62.5	%
Canadian government	3,253		0		1,423		3		4,673		8.3
RMBS	1,536		0		62		7		1,591		2.8
ABS	3,156		0		25		30		3,151		5.6
CMBS	1,774		1		78		11		1,840		3.3
U.S. government	960		0		23		53		930		1.6
State and political subdivisions	1,240		0		109		14		1,335		2.4
Other foreign government	7,394		5		306		84		7,611		13.5
Total fixed maturity securities	$	52,229	$	22	$	4,709	$	490	$	56,426	100.0	%


December 31, 2020:															December 31, 2020:	Amortized		Allowance for		Unrealized		Unrealized		Estimated Fair		% of
																Cost		Credit Losses		Gains		Losses		Value		Total
June 30, 2020:	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total		Impairments in AOCI
Available-for-sale:															Available-for-sale:
Corporate	$	29,785	$	32	$	3,071	$	254	$	32,570	62.3	%	$	—	Corporate	$	31,963	17		$	4,356	$	94	$	36,208	63.9	%
Canadian government	2,917		—		1,941		—		4,858		9.3		—		Canadian government	3,145		0		1,995		0		5,140		9.1
RMBS	1,962		—		104		1		2,065		3.9		—		RMBS	1,735		0		84		2		1,817		3.2
ABS	2,798		—		20		87		2,731		5.2		—		ABS	3,099		0		35		42		3,092		5.4
CMBS	1,850		—		42		41		1,851		3.5		—		CMBS	1,790		3		102		21		1,868		3.3
U.S. government	1,395		—		244		—		1,639		3.1		—		U.S. government	1,242		0		196		1		1,437		2.5
State and political subdivisions	1,056		—		135		7		1,184		2.3		—		State and political subdivisions	1,237		0		157		4		1,390		2.4
Other foreign government	5,140		1		367		58		5,448		10.4		—		Other foreign government	5,337		0		479		33		5,783		10.2
Total fixed maturity securities	$	46,903	$	33	$	5,924	$	448	$	52,346	100.0	%	$	—	Total fixed maturity securities	$	49,548	$	20	$	7,404	$	197	$	56,735	100.0	%

December 31, 2019: Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value % of Total Impairments in AOCI
Available-for-sale:
Corporate $ 29,205
$ 2,269
$ 81
$ 31,393
61.4 % $ —
Canadian government 3,016
1,596
—
4,612
9.0
—
RMBS 2,339
62
3
2,398
4.7
—
ABS 2,973
19
14
2,978
5.8
—
CMBS 1,841
61
3
1,899
3.7
—
U.S. government 2,096
57
1
2,152
4.2
—
State and political subdivisions 1,074
93
3
1,164
2.3
—
Other foreign government 4,209
321
5
4,525
8.9
—
Total fixed maturity securities $ 46,753
$ 4,478
$ 110
$ 51,121
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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):

June 30, 2020 December 31, 2019

Amortized
Cost

Estimated
Fair Value

Amortized
Cost

Estimated
Fair Value
Fixed maturity securities pledged as collateral $ 136
$ 148
$ 113
$ 116
Fixed maturity securities received as collateral n/a
1,206
n/a
727
Assets in trust held to satisfy collateral requirements 27,353
29,726
27,290
29,239

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	March 31, 2021				December 31, 2020
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	131	$	139	$	148	$	162
Fixed maturity securities received as collateral	n/a		1,751		n/a		1,784
Assets in trust held to satisfy collateral requirements	27,893		29,954		27,675		31,179

The Company monitors its concentrations of financial instruments on an ongoing basis and mitigates credit risk by maintaining a diversified investment portfolio 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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March 31, 2021. The Company’s exposure to concentrations of credit risk from single issuers greater than 10% of the Company’s stockholders’ equity included securities of the U.S. government and its agencies, as well as the securities disclosed below, as of ~~June 30, 2020 and~~ December 31, ~~2019~~2020 (dollars in millions).

June 30, 2020 December 31, 2019

Amortized
Cost

Estimated
Fair Value

Amortized
Cost

Estimated
Fair Value
Fixed maturity securities guaranteed or issued by:
Government of Japan $ 1,566
$ 1,555
$ 813
$ 852
Canadian province of Quebec 1,187
2,332
1,205
2,163
Canadian province of Ontario 980
1,436
1,014
1,379


	March 31, 2021				December 31, 2020
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Government of Japan	$	3,366	$	3,352	$	1,493	$	1,491
Canadian province of Quebec	1,337		2,175		1,303		2,474
Canadian province of Ontario	1,081		1,427		1,054		1,528

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale as of ~~June 30, 2020~~,March 31, 2021, are shown by contractual maturity in the table below (dollars in millions). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Structured securities are shown separately in the table below, as they are not due at a single maturity date.

Amortized Cost Estimated Fair Value
Available-for-sale:
Due in one year or less $ 1,453
$ 1,454
Due after one year through five years 8,028
8,412
Due after five years through ten years 10,013
10,979
Due after ten years 20,799
24,854
Structured securities 6,610
6,647
Total $ 46,903
$ 52,346


	Amortized Cost		Estimated Fair Value
Available-for-sale:
Due in one year or less	$	1,361	$	1,378
Due after one year through five years	8,345		8,829
Due after five years through ten years	10,956		11,763
Due after ten years	25,101		27,874
Structured securities	6,466		6,582
Total	$	52,229	$	56,426

Corporate Fixed Maturity Securities

The tables below show the major sectors of the Company’s corporate fixed maturity holdings as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):

June 30, 2020: Estimated
Amortized Cost Fair Value % of Total
Finance $ 11,189
$ 12,127
37.2 %
Industrial 14,962
16,316
50.1
Utility 3,634
4,127
12.7
Total $ 29,785
$ 32,570
100.0 %

December 31, 2019: Estimated
Amortized Cost Fair Value % of Total
Finance $ 10,896
$ 11,653
37.2 %
Industrial 14,692
15,803
50.3
Utility 3,617
3,937
12.5
Total $ 29,205
$ 31,393
100.0 %


March 31, 2021:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	12,045	$	12,906	36.6	%
Industrial	16,819		18,029		51.0
Utility	4,052		4,360		12.4

Total	$	32,916	$	35,295	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	%

Table of Contents

Allowance for Credit Losses and Impairments – Fixed Maturity Securities Available-for-Sale

As discussed in Note 12 – ~~“Business~~“Significant Accounting Policies and ~~Basis~~Pronouncements” of ~~Presentation,”~~the Company’s 2020 Annual Report, allowances for credit losses on fixed maturity securities are recognized in investment related gains (losses), net on the condensed consolidated statements of income. For these securities, the net amount recognized represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the fixed maturity security prior to the allowance for credit losses. Any remaining difference between the fair value and amortized cost is recognized in AOCI.

The following table presents the rollforward of the allowance for credit losses in fixed maturity securities by type for the ~~six~~three months ended ~~June 30,~~ March 31, 2021 and 2020 (dollars in millions):

Corporate Other Foreign Government Total
Balance, beginning of period $ —
$ —
$ —
Credit losses recognized on securities for which credit losses were not previously recorded 40
2
42
Reductions for securities sold during the period (8 ) (1 ) (9 )
Balance, end of period $ 32
$ 1
$ 33


	Three months ended March 31, 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	0		1		5		6

Reductions for securities sold during the period	(1)		(2)		0		(3)

Additional increases or decreases for credit losses on securities that had an allowance recorded in a previous period	0		(1)		0		(1)


Balance, end of period	$	16	$	1	$	5	$	22


	Three months ended March 31, 2020
	Corporate		Other Foreign Government		Total
Balance, beginning of period	$	0	$	0	$	0
Credit losses recognized on securities for which credit losses were not previously recorded	26		7		33






Balance, end of period	$	26	$	7	$	33

Unrealized Losses for Fixed Maturity Securities Available-for-Sale

The following table presents the total gross unrealized losses for the ~~1,477~~1,650 and ~~1,072~~877 fixed maturity securities as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in millions):

June 30, 2020 December 31, 2019

Gross
Unrealized
Losses
% of Total
Gross
Unrealized
Losses
% of Total
Less than 20% $ 348
77.7 % $ 76
69.1 %
20% or more for less than six months 91
20.3
20
18.2
20% or more for six months or greater 9
2.0
14
12.7
Total $ 448
100.0 % $ 110
100.0 %


	March 31, 2021				December 31, 2020
	Gross Unrealized Losses		% of Total		Gross Unrealized Losses		% of Total
Less than 20%	$	427	87.2	%	$	133	67.5	%
20% or more for less than six months	28		5.7		42		21.3
20% or more for six months or greater	35		7.1		22		11.2
Total	$	490	100.0	%	$	197	100.0	%

The Company’s determination of whether a decline in value necessitates the recording of an allowance for credit losses includes an analysis of whether the issuer is current on its contractual payments, evaluating whether it is probable that the Company will be able to collect all amounts due according to the contractual terms of the security and analyzing the overall ability of the Company to recover the amortized cost of the investment.

~~Table of Contents~~

The following tables present the estimated fair values and gross unrealized losses for fixed maturity securities that have estimated fair values below amortized cost as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions). These investments are presented by class and grade of security, as well as the length of time the related fair value has remained below amortized cost.

Table of Contents


														Less than 12 months				12 months or greater				Total
	Less than 12 months				12 months or greater				Total							Gross				Gross				Gross
			Gross				Gross				Gross
June 30, 2020:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
March 31, 2021:													March 31, 2021:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses			Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:													Investment grade securities:
Corporate	$	2,359	$	125	$	67	$	9	$	2,426	$	134	Corporate	$	4,794	$	211	$	219	$	10	$	5,013	$	221
Canadian government													Canadian government	29		3		0		0		29		3
RMBS	—		—		28		1		28		1		RMBS	323		7		0		0		323		7
ABS	1,425		53		558		29		1,983		82		ABS	793		6		933		12		1,726		18
CMBS	690		37		13		1		703		38		CMBS	103		2		68		2		171		4
U.S. government	—		—		—		—		—		—		U.S. government	431		53		0		0		431		53
State and political subdivisions	59		5		12		2		71		7		State and political subdivisions	271		9		29		5		300		14
Other foreign government	1,073		47		—		—		1,073		47		Other foreign government	2,469		50		498		25		2,967		75
Total investment grade securities	5,606		267		678		42		6,284		309		Total investment grade securities	9,213		341		1,747		54		10,960		395
Below investment grade securities:													Below investment grade securities:
Corporate	780		114		53		6		833		120		Corporate	258		45		226		22		$	484	$	67

ABS	20		5		—		—		20		5		ABS	0		0		15		12		15		12
CMBS	23		3		—		—		23		3		CMBS	42		1		44		6		86		7
Other foreign government	103		8		12		3		115		11		Other foreign government	86		4		26		5		112		9
Total below investment grade securities	926		130		65		9		991		139		Total below investment grade securities	386		50		311		45		697		95
Total fixed maturity securities	$	6,532	$	397	$	743	$	51	$	7,275	$	448	Total fixed maturity securities	$	9,599	$	391	$	2,058	$	99	$	11,657	$	490

Less than 12 months 12 months or greater Total
Gross Gross Gross
December 31, 2019: Estimated Unrealized Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
Investment grade securities:
Corporate $ 1,936
$ 29
$ 293
$ 7
$ 2,229
$ 36
RMBS 367
2
84
1
451
3
ABS 773
5
739
9
1,512
14
CMBS 253
3
—
—
253
3
U.S. government 49
1
—
—
49
1
State and political subdivisions 103
2
12
1
115
3
Other foreign government 278
4
—
—
278
4
Total investment grade securities 3,759
46
1,128
18
4,887
64
Below investment grade securities:
Corporate 220
38
100
7
320
45
ABS —
—
—
—
—
—
CMBS —
—
—
—
—
—
Other foreign government —
—
10
1
10
1
Total below investment grade securities 220
38
110
8
330
46
Total fixed maturity securities $ 3,979
$ 84
$ 1,238

$ 26
$ 5,217
$ 110


	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	0		0		0		0		0		0
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 above, as of the dates indicated. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines. Changes in unrealized losses are primarily driven by changes in interest rates.

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

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

Investment Income, Net of Related Expenses

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

Investment Related Gains (Losses), Net

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

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Fixed maturity securities available-for-sale:
Impairment losses and change in allowance for credit losses $ —
$ —
$ (34 ) $ (9 )
Gain on investment activity 46
20
73
48
Loss on investment activity (46 ) (7 ) (54 ) (26 )
Net gains (losses) on equity securities 8
3
(15 ) 7
Other impairment losses and change in mortgage loan provision (22 ) (6 ) (35 ) (8 )
Derivatives and other, net 95
2
(139 ) 8
Total investment related gains (losses), net $ 81
$ 12
$ (204 ) $ 20


	Three months ended March 31,
		2021		2020
Fixed maturity securities available-for-sale:
Impairments and change in allowance for credit losses		$	(2)	$	(34)
Gain on investment activity		167		27
Loss on investment activity		(13)		(8)
Net gains (losses) on equity securities		3		(23)
Other impairment losses and change in mortgage loan provision		18		(13)
Change in fair value of certain limited partnership investments and other, net		111		9
Net gains (losses) on derivatives		18		(243)
Total investment related gains (losses), net		$	302	$	(285)

Securities Borrowing, Lending and ~~Other~~Repurchase Agreements

The following table includes the amount of borrowed securities, loaned securities, ~~loaned~~ and securities received as collateral ~~received~~ as part of the securities lending program and repurchased/reverse repurchased securities pledged and received as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions).

June 30, 2020 December 31, 2019

Amortized
Cost

Estimated
Fair Value

Amortized
Cost

Estimated
Fair Value
Borrowed securities $ 270
$ 300
$ 339
$ 369
Securities lending:
Securities loaned 102
105
98
104
Securities received n/a
107
n/a
107
Repurchase program/reverse repurchase program:
Securities pledged 449
481
356
384
Securities received n/a
372
n/a
370


	March 31, 2021				December 31, 2020
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Borrowed securities	$	233	$	257	$	118	$	161
Securities lending:
Securities loaned	94		102		94		105
Securities received	n/a		104		n/a		102
Repurchase program/reverse repurchase program:
Securities pledged	647		685		653		711
Securities received	n/a		657		n/a		669

The Company held cash collateral for repurchase/reverse repurchase programs of ~~$54 million and $1~~$5 million as of ~~June 30, 2020 and~~March 31, 2021. There was no cash collateral held for repurchase/reverse repurchase programs as of December 31, ~~2019, respectively.~~2020. No cash or securities have been pledged by the Company for its securities borrowing ~~program~~and lending programs as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

The following tables present information on the Company’s securities lending and repurchase/reverse repurchase transactions as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively~~2020 (dollars in millions). Collateral associated with certain borrowed securities is not included within the tables, as the collateral pledged to each counterparty is the right to reinsurance treaty cash flows.

June 30, 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 $ —
$ —
$ —
$ 105
$ 105
Total —
—
—
105
105
Repurchase/reverse repurchase transactions:
Corporate —
—
—
353
353
Other foreign government —
—
—
128
128
Total —
—
—
481
481
Total transactions $ —
$ —
$ —
$ 586
$ 586

Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table $ 533
Amounts related to agreements not included in offsetting disclosure $ 53


	March 31, 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	$	102	$	102
Total	0		0		0		102		102
Repurchase/reverse repurchase transactions:
Corporate	0		0		0		407		407
Other foreign government	0		0		0		278		278
Total	0		0		0		685		685
Total transactions	$	0	$	0	$	0	$	787	$	787

Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table									$	766
Amounts related to agreements not included in offsetting disclosure									$	21

December 31, 2019
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 $ —
$ —
$ —
$ 104
$ 104
Total —
—
—
104
104
Repurchase/reverse repurchase transactions:
Corporate —
—
—
286
286
Other foreign government —
—
—
98
98
Total —
—
—
384
384
Total borrowings $ —
$ —
$ —
$ 488
$ 488

Gross amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table $ 478
Amounts related to agreements not included in offsetting disclosure $ 10


	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

The Company has elected to offset amounts recognized as receivables and payables resulting from the repurchase/reverse repurchase programs. After the effect of offsetting, the net amount presented on the condensed consolidated balance ~~sheets~~sheet was a liability of ~~$3 million and $1~~$5 million as of ~~June 30, 2020 and~~March 31, 2021. After the effect of offsetting, there was no liability presented on the consolidated

balance sheet as of December 31, ~~2019, respectively.~~2020. As of ~~June 30, 2020 and December~~March 31, ~~2019,~~2021, the Company recognized payables resulting from cash received as collateral associated with a repurchase/reverse repurchase ~~agreements~~agreement, as discussed above. As of December 31, 2020, the Company did not have payables resulting from cash received as collateral associated with a repurchase/reverse repurchase agreements. Amounts owed to and due from the counterparties may be settled in cash or offset, in accordance with the agreements.

Mortgage Loans on Real Estate

As of ~~June 30, 2020,~~March 31, 2021, mortgage loans ~~are~~were geographically dispersed throughout the U.S. with the largest concentrations in California ~~(15.1%~~(13.9%), Texas ~~(14.7%~~(13.6%) and Washington ~~(8.6%~~(8.8%)~~. In~~, in addition ~~the Company held mortgage~~to loans secured by properties in Canada ~~(3.0%~~(3.2%) and United Kingdom ~~(0.9%~~(1.8%). The recorded investment in mortgage loans on real estate presented below is gross of unamortized deferred loan origination fees and expenses and valuation allowances.

The following table presents the distribution of the Company’s recorded investment in mortgage loans by property type as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions) ~~is as follows:~~:

June 30, 2020 December 31, 2019
Property type: Carrying Value % of Total Carrying Value % of Total
Office $ 1,773
29.4 % $ 1,771
31.0 %
Retail 1,705
28.2
1,686
29.4
Industrial 1,253
20.7
1,169
20.4
Apartment 868
14.4
766
13.4
Other commercial 441
7.3
335
5.8
Recorded investment 6,040
100.0 % 5,727
100.0 %
Unamortized balance of loan origination fees and expenses (10 ) (9 )
Valuation allowances (56 ) (12 )
Total mortgage loans on real estate $ 5,974
$ 5,706


	March 31, 2021				December 31, 2020
Property type:	Carrying Value		% of Total		Carrying Value		% of Total
Office	$	1,724	28.5	%	$	1,702	29.0	%
Retail	1,753		28.9		1,711		29.3
Industrial	1,297		21.4		1,210		20.6
Apartment	856		14.1		808		13.8
Other commercial	428		7.1		430		7.3
Recorded investment	$	6,058	100.0	%	5,861		100.0	%
Unamortized balance of loan origination fees and expenses	(10)				(10)
Valuation allowances	(47)				(64)
Total mortgage loans on real estate	$	6,001			$	5,787

The following table presents the maturities of the Company’s recorded investment in mortgage loans as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~ ~~are as follows~~2020 (dollars in millions):


	March 31, 2021				December 31, 2020
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	2,478	40.9	%	$	2,276	38.8	%
Due after five years through ten years	2,674		44.1		2,768		47.3
Due after ten years	906		15.0		817		13.9
Total	$	6,058	100.0	%	$	5,861	100.0	%

The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):


	Recorded Investment
	Debt Service Ratios						Construction loans
	>1.20x		1.00x – 1.20x		<1.00x				Total		% of Total
March 31, 2021:
Loan-to-Value Ratio
0% – 59.99%	$	2,877	$	131	$	83	$	26	$	3,117	51.4	%
60% – 69.99%	2,020		64		3		0		2,087		34.5
70% – 79.99%	494		71		43		0		608		10.0
80% or greater	208		21		17		0		246		4.1
Total	$	5,599	$	287	$	146	$	26	$	6,058	100.0	%

Recorded Investment
Debt Service Ratios Construction Loans
>1.20x 1.00x - 1.20x <1.00x Total % of Total
June 30, 2020:
Loan-to-Value Ratio
0% - 59.99% $ 3,074
$ 114
$ 9
$ 1
$ 3,198
53.0 %
60% - 69.99% 1,923
78
30
—
2,031
33.6
70% - 79.99% 559
60
4
—
623
10.3
80% or greater 101
61
26
—
188
3.1
Total $ 5,657
$ 313
$ 69
$ 1
$ 6,040
100.0 %

Recorded Investment
Debt Service Ratios
Construction
Loans

>1.20x 1.00x - 1.20x <1.00x Total % of Total
December 31, 2019:
Loan-to-Value Ratio
0% - 59.99% $ 3,025
$ 52
$ 7
$ —
$ 3,084
53.8 %
60% - 69.99% 1,841
53
11
—
1,905
33.3
70% - 79.99% 492
13
39
—
544
9.5
80% or greater 96
61
37
—
194
3.4
Total $ 5,454
$ 179
$ 94
$ —
$ 5,727
100.0 %


	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	%

The following table sets forth credit quality grades by year of origination of the Company’s recorded investment in mortgage loans as of ~~June 30,~~March 31, 2021 and December 31, 2020 (dollars in millions):


	Recorded Investment
	Year of Origination
	2021		2020		2019		2018		2017		Prior		Total
March 31, 2021:
Internal credit quality grade:
High investment grade	$	230	$	411	$	575	$	451	$	315	$	1,494	$	3,476
Investment grade	116		360		498		388		397		637		2,396
Average	0		0		0		39		19		88		146
Watch list	0		0		0		0		0		4		4
In or near default	0		0		0		0		0		36		36
Total	$	346	$	771	$	1,073	$	878	$	731	$	2,259	$	6,058

The following table presents the current and past due composition of the Company’s recorded investment in mortgage loans as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019 (dollars in millions):~~2020.


	March 31, 2021		December 31, 2020
Current	$	6,043	$	5,846



31 – 60 days past due	15		15
Total	$	6,058	$	5,861

June 30, 2020 December 31, 2019
31-60 days past due $ 63
$ —
61-90 days past due 9
—
Greater than 90 days 15
—
Total past due 87
—
Current 5,953
5,727
Total $ 6,040
$ 5,727

Table of Contents

The following table presents the recorded investment in mortgage loans, by method of measuring impairment, and the related valuation allowances as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):


	March 31, 2021		December 31, 2020
Mortgage loans:
Individually measured for impairment	$	36	$	37
Collectively measured for impairment	6,022		5,824
Recorded investment	$	6,058	$	5,861
Valuation allowances:
Individually measured for impairment	$	0	$	0
Collectively measured for impairment	47		64
Total valuation allowances	$	47	$	64

June 30, 2020 December 31, 2019
Mortgage loans:
Individually measured for impairment $ 17
$ 17
Collectively measured for impairment 6,023
5,710
Recorded investment $ 6,040
$ 5,727
Valuation allowances:
Individually measured for impairment $ —
$ —
Collectively measured for impairment 56
12
Total valuation allowances $ 56
$ 12

~~Information~~The following table presents information regarding the Company’s loan valuation allowances for mortgage loans for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019 is as follows~~ (dollars in millions):

Six months ended June 30,
2020 2019
Balance, beginning of period $ 12
$ 11
Adoption of new accounting standard, see Note 13 14
—
Provision (release) 30
1
Balance, end of period $ 56
$ 12


	Three months ended March 31,
		2021		2020
Balance, beginning of period		$	64	$	12
Adoption of new accounting standard, see Note 13		0		14
Provision (release)		(17)		13

Balance, end of period		$	47	$	39

~~Information~~The following table presents information regarding the portion of the Company’s mortgage loans that were impaired as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019 is as follows~~2020 (dollars in millions):

Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance

Carrying
Value
June 30, 2020:
Impaired mortgage loans with no valuation allowance recorded $ 17
$ 17
$ —
$ 17
Impaired mortgage loans with valuation allowance recorded —
—
—
—
Total impaired mortgage loans $ 17
$ 17
$ —
$ 17
December 31, 2019:
Impaired mortgage loans with no valuation allowance recorded $ 17
$ 17
$ —
$ 17
Impaired mortgage loans with valuation allowance recorded —
—
—
—
Total impaired mortgage loans $ 17
$ 17
$ —
$ 17

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,
2020 2019

Average
Recorded
Investment⁽¹⁾

Interest
Income

Average
Recorded
Investment⁽¹⁾

Interest
Income
Impaired mortgage loans with no valuation allowance recorded $ 17
$ —
$ 17
$ —
Impaired mortgage loans with valuation allowance recorded —
—
—
—
Total impaired mortgage loans $ 17
$ —
$ 17
$ —

Six months ended June 30,
2020 2019

Average
Recorded
Investment⁽¹⁾

Interest
Income

Average
Recorded
Investment⁽¹⁾

Interest
Income
Impaired mortgage loans with no valuation allowance recorded $ 17
$ —
$ 22
$ —
Impaired mortgage loans with valuation allowance recorded
—
—
—
—
Total impaired mortgage loans $ 17
$ —
$ 22
$ —


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

The following table presents the Company’s average investment balance of impaired mortgage loans and the related interest income for the periods indicated (dollars in millions):







	Three months ended March 31,
	2021				2020
	Average Recorded Investment(1)		Interest Income		Average Recorded Investment(1)		Interest Income
Impaired mortgage loans with no valuation allowance recorded	$	36	$	0	$	17	$	0
Impaired mortgage loans with valuation allowance recorded	0		0		0		0
Total impaired mortgage loans	$	36	$	0	$	17	$	0

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

~~Table of Contents~~

The Company did not acquire any impaired mortgage loans during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019. The Company had $15 million of mortgage loans, gross of valuation allowances, that were on nonaccrual status as of~~ ~~June 30, 2020~~.2020. The Company had no mortgage loans that were on a nonaccrual status as of March 31, 2021 and December 31, ~~2019~~.

As2020. For the three months ended March 31, 2021, the Company modified the payment terms of ~~June 30,~~one commercial mortgage loan, with a carrying value of approximately $10 million in response to COVID-19. For the year ended December 31, 2020, the Company modified the payment terms of ~~approximately 40~~52 commercial mortgage loans, with a carrying value of approximately ~~$540~~$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

Table of Contents

The majority of policy loans are associated with one client. These policy loans present no credit risk as the amount of the loan cannot exceed the obligation due to the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying policies determine the policy loan interest rates. The Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.

Funds Withheld at Interest

As of ~~June 30, 2020, $3.1~~March 31, 2021, $3.2 billion of the funds withheld at interest balance is associated with one client. For reinsurance agreements written on a ~~modified coinsurance (“modco”)~~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.

Other Invested Assets

Other invested assets include limited partnership interests, joint ventures (other than operating joint ventures), lifetime mortgages, derivative contracts and fair value option (“FVO”) contractholder-directed unit-linked investments. Other invested assets also ~~includes~~include FHLB common stock, which is included in Other in the table below. The allowance for credit losses for lifetime mortgages as of ~~both June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, was $1 million and $2 ~~million.~~million, respectively. Carrying values of these assets as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are as follows (dollars in millions):


	March 31, 2021		December 31, 2020
Limited partnership interests and real estate joint ventures	$	1,529	$	1,367
Lifetime mortgages	958		935
Derivatives	125		140
FVO contractholder-directed unit-linked investments	276		289
Other	95		98
Total other invested assets	$	2,983	$	2,829

June 30, 2020 December 31, 2019
Limited partnership interests and real estate joint ventures $ 1,204
$ 1,134
Lifetime mortgages 787
775
Derivatives 205
117
FVO contractholder-directed unit-linked investments 250
260
Other 101
77
Total other invested assets $ 2,547
$ 2,363

5. Derivative Instruments

Accounting for Derivative Instruments and Hedging Activities

See Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s ~~2019~~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, ~~longevity swaps, mortality swaps~~other derivatives, and embedded derivatives.

For detailed information on these derivative instruments and the related strategies, see Note 5 – “Derivative Instruments” of the Company’s ~~2019~~2020 Annual Report.

Summary of Derivative Positions

Derivatives, except for embedded derivatives, ~~and longevity and mortality swaps,~~ are ~~carried on the Company’s condensed consolidated balance sheets~~included in other invested ~~assets or other liabilities, at fair value. Longevity and mortality swaps, which have been discontinued or matured in 2019 are included on the condensed consolidated balance sheets in other~~ assets or other liabilities, at fair value. Embedded derivative assets and liabilities on 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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):

June 30, 2020 December 31, 2019
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 $ 1,086
$ 105
$ 3
$ 909
$ 70
$ 3
Financial futures Equity 342
—
—
307
—
—
Foreign currency swaps Foreign currency 150
—
21
150
—
9
Foreign currency forwards Foreign currency 252
1
—
175
1
—
CPI swaps CPI 569
9
52
441
—
28
Credit default swaps Credit 1,327
3
1
1,306
5
—
Equity options Equity 366
38
—
364
15
—
Synthetic GICs Interest rate 14,888
—
—
13,823
—
—
Embedded derivatives in:
Modco or funds withheld arrangements —
—
108
—
121
—
Indexed annuity products —
—
746
—
—
767
Variable annuity products —
—
184
—
—
163
Total non-hedging derivatives 18,980
156
1,115
17,475
212
970
Derivatives designated as hedging instruments:
Interest rate swaps Foreign currency/Interest rate 489
1
41
535
1
29
Foreign currency swaps Foreign currency 302
23
10
342
17
2
Foreign currency forwards Foreign currency 1,092
68
—
1,094
28
2
Total hedging derivatives 1,883
92
51
1,971
46
33
Total derivatives $ 20,863
$ 248
$ 1,166
$ 19,446
$ 258
$ 1,003


		March 31, 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	$	1,107	$	67	$	3	$	1,084	$	93	$	1
Financial futures	Equity	285		0		0		258		0		0
Foreign currency swaps	Foreign currency	150		0		9		150		0		18
Foreign currency forwards	Foreign currency	475		2		10		347		4		2
CPI swaps	CPI	627		19		12		612		11		19
Credit default swaps	Credit	1,720		32		3		1,517		13		0
Equity options	Equity	443		26		0		395		29		0


Synthetic GICs	Interest rate	16,423		0		0		16,644		0		0
Embedded derivatives in:
Modco or funds withheld arrangements		0		109		0		0		58		0
Indexed annuity products		0		0		720		0		0		752
Variable annuity products		0		0		136		0		0		155
Total non-hedging derivatives		21,230		255		893		21,007		208		947
Derivatives designated as hedging instruments:
Interest rate swaps	Foreign currency/Interest rate	878		2		24		802		3		24
Foreign currency swaps	Foreign currency	214		6		1		234		8		1
Foreign currency forwards	Foreign currency	1,141		5		18		1,255		10		15
Other derivatives	Interest rate	114		0		7		0		0		0
Total hedging derivatives		2,347		13		50		2,291		21		40
Total derivatives		$	23,577	$	268	$	943	$	23,298	$	229	$	987

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 ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were (dollars in millions):

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, 2020:
Foreign currency swaps Foreign-denominated fixed maturity securities $ 15
$ (13 )
For the three months ended June 30, 2019:
Foreign currency swaps Foreign-denominated fixed maturity securities $ (4 ) $ 1
For the six months ended June 30, 2020:
Foreign currency swaps Foreign-denominated fixed maturity securities $ (8 ) $ 2
For the six months ended June 30, 2019:
Foreign currency swaps Foreign-denominated fixed maturity securities $ (4 ) $ —


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 March 31, 2021:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	0	$	1
For the three months ended March 31, 2020:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(22)	$	14

Certain derivative instruments are designated as cash flow hedges when they meet the requirements of the general accounting principles for Derivatives and Hedging. The Company designates and accounts for the following as cash flow hedges: (i) certain interest rate swaps, in which the cash flows of assets and liabilities are variable based on a benchmark rate; ~~and~~ (ii) certain interest rate swaps, in which the cash flows of assets are denominated in different currencies, commonly referred to as cross-currency ~~swaps.~~swaps; and (iii) forward bond purchase commitments.

The following ~~tables present~~table presents the components of AOCI, before income tax, and the condensed consolidated income statement classification where the gain or loss is recognized related to cash flow hedges for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (dollars in millions):

Three months ended June 30,
2020 2019
Balance, beginning of period $ (87 ) $ (2 )
Gains (losses) deferred in other comprehensive income (loss) 12
(13 )
Amounts reclassified to investment income —
—
Amounts reclassified to interest expense 1
—
Balance, end of period $ (74 ) $ (15 )

Six months ended June 30,
2020 2019
Balance, beginning of period $ (26 ) $ 9
Gains (losses) deferred in other comprehensive income (loss) (49 ) (23 )
Amounts reclassified to investment income —
—
Amounts reclassified to interest expense 1
(1 )
Balance, end of period $ (74 ) $ (15 )










	Three months ended March 31,
	2021		2020
Balance, beginning of period	$	(49)	$	(26)
Gains (losses) deferred in other comprehensive income (loss)	(24)		(61)
Amounts reclassified to investment income	0		0
Amounts reclassified to interest expense	2		0
Balance, end of period	$	(71)	$	(87)

As of ~~June 30, 2020, an immaterial amount and~~March 31, 2021, approximately ~~$(6)~~$6 million of before-tax deferred net ~~gains (losses)~~losses on derivative instruments recorded in AOCI are expected to be reclassified to ~~investment income and~~ interest expense ~~respectively,~~ during the next twelve months.

before-tax deferred net gains expected to be reclassified to investment income during the next twelve months.

The following table presents the 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 six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (dollars in millions):


Derivative Type	Gain (Loss) Deferred in OCI		Gain (Loss) Reclassified into Income from OCI
			Investment Income		Interest Expense
For the three months ended March 31, 2021:
Interest rate	$	(23)	$	0	$	(2)
Foreign currency/interest rate	(1)		0		0
Total	$	(24)	$	0	$	(2)
For the three months ended March 31, 2020:
Interest rate	$	(36)	$	0	$	0
Foreign currency/interest rate	(25)		0		0
Total	$	(61)	$	0	$	0

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, 2020:
Interest rate $ (1 ) $ —
$ (1 )
Currency/Interest rate 13
—
—
Total $ 12
$ —
$ (1 )
For the three months ended June 30, 2019:
Interest rate $ (10 ) $ —
$ —
Currency/Interest rate (3 ) —
—
Total $ (13 ) $ —
$ —

For the six months ended June 30, 2020:
Interest rate $ (36 ) $ —
$ (1 )
Currency/Interest rate (13 ) —
—
Total $ (49 ) $ —
$ (1 )
For the six months ended June 30, 2019:
Interest rate $ (22 ) $ —
$ 1
Currency/Interest rate (1 ) —
—
Total $ (23 ) $ —
$ 1
For the three months ended March 31, 2021 and 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 six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (dollars in millions):


	Derivative Gains (Losses) Deferred in AOCI
	For the three months ended March 31,
Type of NIFO Hedge	2021		2020
Foreign currency swaps	$	(1)	$	15
Foreign currency forwards	(14)		80
Total	$	(15)	$	95

Derivative Gains (Losses) Deferred in AOCI
For the three months ended June 30, For the six months ended June 30,
Type of NIFO Hedge 2020 2019 2020 2019
Foreign currency swaps $ (6 ) $ (2 ) $ 9
$ (10 )
Foreign currency forwards (34 ) (6 ) 46
(24 )
Total $ (40 ) $ (8 ) $ 55
$ (34 )

Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging

The Company uses various other derivative instruments for risk management purposes that either do not qualify or have not been qualified for hedge accounting treatment. The gain or loss related to the change in fair value for these derivative instruments is recognized in investment related gains (losses), net in the condensed consolidated statements of income, except where otherwise noted.

A summary of the effect of non-hedging derivatives, including embedded derivatives, on the Company’s condensed consolidated statements of income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ is as follows (dollars in millions):

Gain (Loss) for the three months ended June 30,
Type of Non-hedging Derivative Income Statement Location of Gain (Loss) 2020 2019
Interest rate swaps Investment related gains (losses), net $ 3
$ 34
Financial futures Investment related gains (losses), net (48 ) (8 )
Foreign currency swaps Investment related gains (losses), net 3
(6 )
Foreign currency forwards Investment related gains (losses), net 1
—
CPI swaps Investment related gains (losses), net 26
(7 )
Credit default swaps Investment related gains (losses), net 17
5
Equity options Investment related gains (losses), net (25 ) (5 )
Longevity swaps Other revenues —
2
Mortality swaps Other revenues —
(1 )
Subtotal (23 ) 14
Embedded derivatives in:
Modco or funds withheld arrangements Investment related gains (losses), net 1
5
Indexed annuity products Interest credited (7 ) (8 )
Variable annuity products Investment related gains (losses), net 107
(18 )
Total non-hedging derivatives $ 78
$ (7 )

Gain (Loss) for the six months ended June 30,
Type of Non-hedging Derivative Income Statement Location of Gain (Loss) 2020 2019
Interest rate swaps Investment related gains (losses), net $ 109
$ 58
Financial futures Investment related gains (losses), net (4 ) (30 )
Foreign currency swaps Investment related gains (losses), net (10 ) (5 )
Foreign currency forwards Investment related gains (losses), net (2 ) —
CPI swaps Investment related gains (losses), net (14 ) (16 )
Credit default swaps Investment related gains (losses), net (7 ) 20
Equity options Investment related gains (losses), net 28
(28 )
Longevity swaps Other revenues —
4
Mortality swaps Other revenues —
—
Subtotal 100
3
Embedded derivatives in:
Modco or funds withheld arrangements Investment related gains (losses), net (229 ) 3
Indexed annuity products Interest credited (1 ) (5 )
Variable annuity products Investment related gains (losses), net (21 ) —
Total non-hedging derivatives $ (151 ) $ 1


		Gain (loss) for the three months ended March 31,
Type of Non-hedging Derivative	Income Statement Location of Gain (Loss)	2021		2020
Interest rate swaps	Investment related gains (losses), net	$	(70)	$	106
Financial futures	Investment related gains (losses), net	(10)		44
Foreign currency swaps	Investment related gains (losses), net	9		(13)
Foreign currency forwards	Investment related gains (losses), net	(8)		(3)
CPI swaps	Investment related gains (losses), net	18		(40)
Credit default swaps	Investment related gains (losses), net	20		(24)
Equity options	Investment related gains (losses), net	(10)		53


Subtotal		(51)		123
Embedded derivatives in:
Modco or funds withheld arrangements	Investment related gains (losses), net	50		(230)

Indexed annuity products	Interest credited	14		6
Variable annuity products	Investment related gains (losses), net	19		(128)
Total non-hedging derivatives		$	32	$	(229)

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):


	March 31, 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	$	26	$	492	17.8	$	11	$	287	15.0
Subtotal	26		492		17.8	11		287		15.0
BBB+/BBB/BBB-
Single name credit default swaps	2		230		1.7	2		232		1.6
Credit default swaps referencing indices	1		988		3.7	0		988		3.9
Subtotal	3		1,218		3.3	2		1,220		3.5
BB+/BB/BB-
Single name credit default swaps	0		10		0.5	0		10		0.7
Subtotal	0		10		0.5	0		10		0.7
Total	$	29	$	1,720	7.4	$	13	$	1,517	5.6

(1)The rating agency designations are based on ratings from Standard and Poor’s (“S&P”).

(2)Assumes the value of the referenced credit obligations is zero.

June 30, 2020 December 31, 2019
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 $ 1
$ 87
1.7 $ 2
$ 142
1.7
Subtotal 1
87
1.7 2
142
1.7
BBB+/BBB/BBB-
Single name credit default swaps —
252
1.8 3
291
1.9
Credit default swaps referencing indices 1
988
4.4 —
873
4.7
Subtotal 1
1,240
3.9 3
1,164
4.0
Total $ 2
$ 1,327
3.7 $ 5
$ 1,306
3.7
(3)The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.

Netting Arrangements and Credit Risk

Certain of the Company’s derivatives are subject to enforceable master netting arrangements and reported as a net asset or liability in the condensed consolidated balance sheets. The Company nets all derivatives that are subject to such arrangements.

The Company has elected to include all derivatives, except embedded derivatives, in the ~~table~~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, and repurchase/reverse repurchase programs.

The following table provides information relating to the netting of the Company’s derivative instruments as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):


							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments (1)		Cash Collateral Pledged/ Received		Net Amount
March 31, 2021:
Derivative assets	$	159	$	(34)	$	125	$	(33)	$	(81)	$	11
Derivative liabilities	87		(34)		53		(118)		(43)		(108)
December 31, 2020:
Derivative assets	$	171	$	(31)	$	140	$	(30)	$	(98)	$	12
Derivative liabilities	80		(31)		49		(146)		(47)		(144)

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, 2020:
Derivative assets $ 248
$ (43 ) $ 205
$ —
$ (205 ) $ —
Derivative liabilities 128
(43 ) 85
(128 ) (89 ) (132 )
December 31, 2019:
Derivative assets $ 137
$ (20 ) $ 117
$ —
$ (119 ) $ (2 )
Derivative liabilities 73
(20 ) 53
(92 ) (52 ) (91 )

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

~~The Company had $4 million and no credit exposure related to its derivative contracts, as of June 30, 2020 and December 31, 2019, respectively.~~ The Company may be exposed to credit-related losses in the event of non-performance by counterparties to derivative financial ~~instruments with a positive fair value.~~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 March 31, 2021, the ~~Company.~~Company had credit exposure of $18 million.

Derivatives may be exchange-traded or they may be privately negotiated contracts, which are referred to as over-the-counter (“OTC”) derivatives. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC cleared”) and others are bilateral contracts between two counterparties. The Company manages its credit risk related to OTC derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master netting agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. The Company is only exposed to the default of the central clearing counterparties for OTC

cleared derivatives, and these transactions require initial and daily variation margin collateral postings. Exchange-traded derivatives are settled on a daily basis, thereby reducing the credit risk exposure in the event of non-performance by counterparties to such financial instruments.

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 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 ~~what~~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.

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 Assets and Liabilities” in the Notes to Consolidated Financial Statements included in the Company’s ~~2019~~2020 Annual Report.

Assets and Liabilities by Hierarchy Level

Assets and liabilities measured at fair value on a recurring basis as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are summarized below (dollars in millions):


March 31, 2021:			Fair Value Measurements Using:
	Total		Level 1		Level 2		Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate	$	35,295	$	0	$	32,194	$	3,101
Canadian government	4,673		0		4,673		0
RMBS	1,591		0		1,588		3
ABS	3,151		0		2,822		329
CMBS	1,840		0		1,784		56
U.S. government	930		809		108		13
State and political subdivisions	1,335		0		1,326		9
Other foreign government	7,611		0		7,595		16
Total fixed maturity securities – available-for-sale	56,426		809		52,090		3,527
Equity securities	135		81		0		54
Funds withheld at interest – embedded derivatives & other	176		0		0		176
Cash equivalents	1,460		1,434		26		0
Short-term investments	123		3		109		11
Other invested assets:
Derivatives	125		0		125		0
FVO contractholder-directed unit-linked investments	276		222		54		0


Total other invested assets (1)	401		222		179		0

Total	$	58,721	$	2,549	$	52,404	$	3,768
Liabilities:
Interest sensitive contract liabilities – embedded derivatives	$	856	$	0	$	0	$	856
Other liabilities:
Derivatives	53		0		53		0
Total	$	909	$	0	$	53	$	856

June 30, 2020: Fair Value Measurements Using:
Total Level 1 Level 2 Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate $ 32,570
$ —
$ 30,262
$ 2,308
Canadian government 4,858
—
4,858
—
RMBS 2,065
—
2,061
4
ABS 2,731
—
2,623
108
CMBS 1,851
—
1,810
41
U.S. government 1,639
1,528
96
15
State and political subdivisions 1,184
—
1,175
9
Other foreign government 5,448
—
5,431
17
Total fixed maturity securities – available-for-sale 52,346
1,528
48,316
2,502
Equity securities 130
68
—
62
Funds withheld at interest – embedded derivatives (108 ) —
—
(108 )
Cash equivalents 2,945
2,945
—
—
Short-term investments 35
17
13
5
Other invested assets:
Derivatives 205
—
205
—
FVO contractholder-directed unit-linked investments 250
192
58
—
Other 2
—
2
—
Total other invested assets 457
192
265
—
Total $ 55,805
$ 4,750
$ 48,594
$ 2,461
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives $ 930
$ —
$ —
$ 930
Other liabilities:
Derivatives 85
—
85
—
Total $ 1,015
$ —
$ 85
$ 930
(1)Other invested assets included in the fair value hierarchy exclude limited partnership interests that are measured at estimated fair value using the net asset value (“NAV”) per share (or its equivalent) as a practical expedient. As of March 31, 2021, the fair value of such investments was $465 million.

December 31, 2019: Fair Value Measurements Using:
Total Level 1 Level 2 Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate $ 31,393
$ —
$ 29,207
$ 2,186
Canadian government 4,612
—
3,908
704
RMBS 2,398
—
2,349
49
ABS 2,978
—
2,865
113
CMBS 1,899
—
1,853
46
U.S. government 2,152
2,030
106
16
State and political subdivisions 1,164
—
1,155
9
Other foreign government 4,525
—
4,509
16
Total fixed maturity securities – available-for-sale 51,121
2,030
45,952
3,139
Equity securities 320
243
—
77
Funds withheld at interest – embedded derivatives 121
—
—
121
Cash equivalents 274
274
—
—
Short-term investments 32
4
26
2
Other invested assets:
Derivatives 117
—
117
—
FVO contractholder-directed unit-linked investments 260
207
53
—
Other —
—
—
—
Total other invested assets 377
207
170
—
Total $ 52,245
$ 2,758
$ 46,148
$ 3,339
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives $ 930
$ —
$ —
$ 930
Other liabilities:
Derivatives 53
—
53
—
Total $ 983
$ —
$ 53
$ 930

Quantitative Information Regarding Internally - Priced Assets and Liabilities

The following table presents quantitative information about significant unobservable inputs used in Level 3 fair value measurements that are developed internally by the Company as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in millions):


	Estimated Fair Value				Valuation Technique	Unobservable Inputs	Range (Weighted Average)
	March 31, 2021		December 31, 2020				March 31, 2021	December 31, 2020
Assets:
Corporate	$	21	$	37	Market comparable securities	Liquidity premium	N/A	0-1% (1%)
						EBITDA Multiple	5.2x-7.6x (6.5x)	5.2x-11.2x (7.1x)
ABS	79		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	12		10		Market comparable securities	EBITDA Multiple	6.9x-10.6x (8.1x)	6.9x-10.6x (7.9x)
Funds withheld at interest – embedded derivatives	109		58		Total return swap	Mortality	0-100% (3%)	0-100% (3%)
						Lapse	0-35% (14%)	0-35% (13%)
						Withdrawal	0-5% (3%)	0-5% (3%)
						CVA	0-5% (1%)	0-5% (1%)
						Crediting rate	2-4% (2%)	2-4% (2%)


Liabilities:
Interest sensitive contract liabilities – embedded derivatives – indexed annuities	720		752		Discounted cash flow	Mortality	0-100% (3%)	0-100% (3%)
						Lapse	0-35% (14%)	0-35% (13%)
						Withdrawal	0-5% (3%)	0-5% (3%)
						Option budget projection	2-4% (2%)	2-4% (2%)
Interest sensitive contract liabilities – embedded derivatives – variable annuities	136		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%)

Estimated Fair Value Valuation Technique Unobservable Inputs Range (Weighted Average)
June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019
Assets:
Corporate $ 1,155
$ 1,070
Market comparable securities Liquidity premium 0-2% (1%)
0-2% (1%)
EBITDA Multiple 5.2x-8.0x (6.9x)
5.2x-7.1x (6.5x)
ABS 88
101
Market comparable securities Liquidity premium 1-18% (3%)
0-4% (1%)
U.S. government 15
16
Market comparable securities Liquidity premium 0-1% (1%)
0-1% (1%)
Other foreign government 17
16
Market comparable securities Liquidity premium 0-1% (1%)
0-1% (1%)
Equity securities 32
32
Market comparable securities Liquidity premium 4 % 4 %
EBITDA Multiple 6.9x-10.6x (8.0x)
6.9x-9.3x (7.8x)

Funds withheld at interest – embedded derivatives (108 ) 121
Total return swap Mortality 0-100% (2%)
0-100% (2%)
Lapse 0-35% (14%)
0-35% (13%)
Withdrawal 0-5% (3%)
0-5% (3%)
CVA 0-5% (2%)
0-5% (1%)
Crediting rate 2-4% (2%)
2-4% (2%)
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives – indexed annuities 746
768
Discounted cash flow Mortality 0-100% (2%)
0-100% (2%)
Lapse 0-35% (14%)
0-35% (10%)
Withdrawal 0-5% (3%)
0-5% (3%)
Option budget projection 2-4% (2%)
2-4% (2%)
Interest-sensitive contract liabilities – embedded derivatives – variable annuities 184
163
Discounted cash flow Mortality 0-100% (2%)
0-100% (1%)
Lapse 0-25% (5%)
0-25% (5%)
Withdrawal 0-7% (5%)
0-7% (5%)
CVA 0-5% (2%)
0-5% (1%)
Long-term volatility 0-27% (12%)
0-27% (12%)

Changes in Level 3 Assets and Liabilities

Assets and liabilities transferred into Level 3 are due to a lack of observable market transactions and price information. Transfers out of Level 3 are primarily the result of the Company obtaining observable pricing information or a ~~third party~~third-party pricing quotation that appropriately reflects the fair value of those assets and liabilities.

For further information on the Company’s valuation processes, see Note 6 – ~~“Fair~~“Fair Value of Assets and Liabilities” in the Notes to Consolidated Financial Statements included in the Company’s ~~2019~~2020 Annual Report.

The reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows (dollars in millions):


For the three months ended March 31, 2021:	Fixed maturity securities – available-for-sale												Funds withheld at interest –embedded derivatives & other		Interest-sensitive contract liabilities embedded derivatives
	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	1		0		0		0		0		0		(5)		0
Investment related gains (losses), net	(1)		0		0		0		1		0		50		19

Interest credited	0		0		0		0		0		0		0		13

Included in other comprehensive income	(82)		(1)		(1)		0		0		0		1		0

Purchases(1)	223		0		166		0		0		0		16		(3)
Sales(1)	(1)		0		0		0		0		0		0		0
Settlements(1)	(72)		0		(61)		(1)		0		0		0		22
Transfers into Level 3	4		0		30		0		0		0		0		0
Transfers out of Level 3	0		0		0		0		0		(4)		0		0
Fair value, end of period	$	3,101	$	16	$	388	$	22	$	54	$	11	$	176	$	(856)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of related expenses	$	1	$	0	$	0	$	0	$	0	$	0	$	(5)	$	0
Investment related gains (losses), net	(1)		0		0		0		1		0		50		16

Claims and other policy benefits	0		0		0		0		0		0		0		(8)

Included in other comprehensive income	(82)		(1)		(1)		0		0		0		0		0

For the three months ended June 30, 2020: Fixed maturity securities - available-for-sale
Funds
withheld at interest – embedded derivatives
Other assets and liabilities, net – longevity and mortality swaps 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 —
—
—
—
—
—
—
—
—
Investment related gains (losses), net (14 ) —
—
—
3
—
1
—
106
Interest credited —
—
—
—
—
—
—
—
(7 )
Included in other comprehensive income 112
2
17
—
—
—
—
—
—
Other revenues —
—
—
—
—
—
—
—
—
Purchases⁽¹⁾
79
—
15
—
3
5
—
—
(8 )
Sales⁽¹⁾
(18 ) —
(3 ) —
—
—
—
—
—
Settlements⁽¹⁾
(44 ) —
(18 ) (1 ) —
(1 ) —
—
21
Transfers into Level 3 —
—
—
—
—
—
—
—
—
Transfers out of Level 3 (4 ) —
(2 ) —
—
—
—
—
—
Fair value, end of period $ 2,308
$ 17
$ 153
$ 24
$ 62
$ 5
$ (108 ) $ —
$ (930 )
Unrealized gains and losses recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of related expenses $ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
Investment related gains (losses), net (15 ) —
—
—
3
—
1
—
103
Other revenues —
—
—
—
—
—
—
—
—
Interest credited —
—
—
—
—
—
—
—
(27 )
Included in other comprehensive income 111
2
16
—
—
—
—
—
—

withheld at interest – embedded derivatives

For the six months ended June 30, 2019: Fixed maturity securities - available-for-sale
Funds
withheld at interest – embedded derivatives
Other assets and liabilities, net – longevity and mortality swaps 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 $ 1,331
$ 533
$ 103
$ 28
$ 33
$ 2
$ 110
$ 47
$ (945 )
Total gains/losses (realized/unrealized)
Included in earnings, net:
Investment income, net of related expenses —
7
—
—
—
—
—
—
—
Investment related gains (losses), net —
—
—
—
6
—
3
—
—
Interest credited —
—
—
—
—
—
—
—
(5 )
Included in other comprehensive income 36
137
2
1
—
—
—
—
—
Other revenues —
—
—
—
—
—
—
4
—
Purchases⁽¹⁾
391
10
43
—
6
28
—
—
4
Sales⁽¹⁾
(25 ) —
—
—
—
(1 ) —
—
—
Settlements⁽¹⁾
(104 ) —
(29 ) (2 ) —
(1 ) —
—
38
Transfers into Level 3 16
—
7
—
—
—
—
—
—
Transfers out of Level 3 (1 ) —
—
—
—
—
—
—
—
Fair value, end of period $ 1,644
$ 687
$ 126
$ 27
$ 45
$ 28
$ 113
$ 51
$ (908 )
Unrealized gains and losses 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 $ —
$ 7
$ —
$ —
$ —
$ —
$ —
$ —
$ —
Investment related gains (losses), net —
—
—
—
6
—
3
—
(3 )
Other revenues —
—
—
—
—
—
—
4
—
Interest credited —
—
—
—
—
—
—
—
(3 )


For the three months ended March 31, 2020:	Fixed maturity securities – available-for-sale												Funds withheld at interest –embedded derivatives		Interest-sensitive contract liabilities embedded derivatives
	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	(11)		0		0		0		(7)		0		(230)		(128)

Interest credited	0		0		0		0		0		0		0		6

Included in other comprehensive income	(115)		(1)		(27)		1		0		0		0		0

Purchases(1)	231		0		9		0		0		0		0		(11)
Sales(1)	(44)		0		(1)		0		0		0		0		0
Settlements(1)	(52)		0		(13)		(1)		0		0		0		21
Transfers into Level 3	1		0		21		0		0		0		0		0
Transfers out of Level 3	0		(704)		(53)		0		(14)		(1)		0		0
Fair value, end of period	$	2,197	$	15	$	144	$	25	$	56	$	1	$	(109)	$	(1,042)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of related expenses	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Investment related gains (losses), net	(11)		0		0		0		(7)		0		(230)		(131)

Claims & other policy benefits	0		0		0		0		0		0		0		(15)

Included in other comprehensive income	(140)		(1)		(27)		1		0		0		0		0

(1)The amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward. The Company had no issuances during the period.

Nonrecurring Fair Value Measurements

Fair Value of Financial Instruments

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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (dollars in 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 ~~2019~~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.


March 31, 2021:	Carrying Value (1)		Estimated Fair Value		Fair Value Measurement Using:
					Level 1		Level 2		Level 3		NAV
Assets:
Mortgage loans on real estate	$	6,001	$	6,231	$	0	$	0	$	6,231	$	0
Policy loans	1,253		1,253		0		1,253		0		0
Funds withheld at interest	5,264		5,618		0		0		5,618		0
Cash and cash equivalents	1,662		1,662		1,662		0		0		0
Short-term investments	34		34		34		0		0		0
Other invested assets	1,139		1,115		6		86		1,023		0
Accrued investment income	546		546		0		546		0		0
Liabilities:
Interest-sensitive contract liabilities	$	18,031	$	19,470	$	0	$	0	$	19,470	$	0

Long-term debt	3,573		3,800		0		0		3,800		0
Collateral finance and securitization notes	346		311		0		0		311		0

December 31, 2020:
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

(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 on a recurring basis.

7. Segment Information

Carrying Value ⁽¹⁾

The accounting policies of the segments are the same as those described in ~~the Significant~~Note 2 – “Significant Accounting Policies and ~~Pronouncements~~Pronouncements” in ~~Note 2 of~~ the ~~consolidated financial statements accompanying~~Notes to Consolidated Financial Statements included in the ~~2019~~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.

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 millions).:


	Three months ended March 31,
Revenues:		2021		2020
U.S. and Latin America:
Traditional		$	1,637	$	1,533
Financial Solutions		318		139
Total		1,955		1,672
Canada:
Traditional		343		296
Financial Solutions		26		24
Total		369		320
Europe, Middle East and Africa:
Traditional		457		407
Financial Solutions		146		78
Total		603		485
Asia Pacific:
Traditional		647		667
Financial Solutions		104		68
Total		751		735
Corporate and Other		441		(8)
Total		$	4,119	$	3,204


	Three months ended March 31,
Income (loss) before income taxes:		2021		2020
U.S. and Latin America:
Traditional		$	(338)	$	(62)
Financial Solutions		83		(15)
Total		(255)		(77)
Canada:
Traditional		24		23
Financial Solutions		6		3
Total		30		26
Europe, Middle East and Africa:
Traditional		(68)		17
Financial Solutions		60		30
Total		(8)		47
Asia Pacific:
Traditional		41		24
Financial Solutions		28		(25)
Total		69		(1)
Corporate and Other		350		(91)
Total		$	186	$	(96)


Assets:	March 31, 2021		December 31, 2020
U.S. and Latin America:
Traditional	$	20,208	$	20,071
Financial Solutions	24,426		25,433
Total	44,634		45,504
Canada:
Traditional	4,937		4,682
Financial Solutions	12		13
Total	4,949		4,695
Europe, Middle East and Africa:
Traditional	4,855		4,763
Financial Solutions	6,845		7,292
Total	11,700		12,055
Asia Pacific:
Traditional	8,289		8,197
Financial Solutions	6,682		4,299
Total	14,971		12,496
Corporate and Other	8,556		9,906
Total	$	84,810	$	84,656

Three months ended June 30, Six months ended June 30,
Revenues: 2020 2019 2020 2019
U.S. and Latin America:
Traditional $ 1,642
$ 1,584
$ 3,175
$ 3,125
Financial Solutions 323
302
462
556
Total 1,965
1,886
3,637
3,681
Canada:
Traditional 311
318
607
630
Financial Solutions 22
24
46
48
Total 333
342
653
678
Europe, Middle East and Africa:
Traditional 371
370
778
754
Financial Solutions 136
114
214
223
Total 507
484
992
977
Asia Pacific:
Traditional 636
634
1,303
1,307
Financial Solutions 75
59
143
114
Total 711
693
1,446
1,421
Corporate and Other 90
62
82
130
Total $ 3,606
$ 3,467
$ 6,810
$ 6,887

Three months ended June 30, Six months ended June 30,
Income (loss) before income taxes: 2020 2019 2020 2019
U.S. and Latin America:
Traditional $ (158 ) $ 55
$ (220 ) $ 67
Financial Solutions 117
92
102
175
Total (41 ) 147
(118 ) 242
Canada:
Traditional 44
46
67
97
Financial Solutions 4
4
7
5
Total 48
50
74
102
Europe, Middle East and Africa:
Traditional 16
16
33
32
Financial Solutions 98
52
128
90
Total 114
68
161
122
Asia Pacific:
Traditional 47
34
71
71
Financial Solutions 26
2
1
8
Total 73
36
72
79
Corporate and Other 1
(41 ) (90 ) (68 )
Total $ 195
$ 260
$ 99
$ 477

Assets: June 30, 2020 December 31, 2019
U.S. and Latin America:
Traditional $ 19,867
$ 19,353
Financial Solutions 24,832
25,117
Total 44,699
44,470
Canada:
Traditional 4,282
4,361
Financial Solutions 19
64
Total 4,301
4,425
Europe, Middle East and Africa:
Traditional 4,087
4,032
Financial Solutions 6,449
6,502
Total 10,536
10,534
Asia Pacific:
Traditional 7,559
6,800
Financial Solutions 3,829
2,557
Total 11,388
9,357
Corporate and Other 9,805
7,945
Total $ 80,729
$ 76,731

8. Commitments, Contingencies and Guarantees

Funding of Investments

The Company’s commitments to fund investments as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, are presented in the following table (dollars in millions):

June 30, 2020 December 31, 2019
Limited partnership interests and joint ventures $ 656
$ 685
Commercial mortgage loans 70
243
Bank loans and private placements 141
181
Lifetime mortgages 69
87


	March 31, 2021		December 31, 2020
Limited partnership interests and joint ventures	$	713	$	678
Mortgage loans on real estate	163		199
Bank loans and private placements	269		194
Lifetime mortgages	55		43

The Company anticipates that the majority of its current commitments will be invested over the next five years; however, these commitments could become due any time at the request of the counterparties. Bank loans and private placements are included in fixed maturity securities available-for-sale.

The Company has a liability for expected credit losses associated with unfunded commitments of approximately $1 million and $2 million as of March 31, 2021 and December 31, 2020, which is included in other liabilities on the Company’s condensed consolidated balance ~~sheets, associated with unfunded commitments of approximately $1 million as of June 30, 2020.~~sheets.

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.

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.

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). In addition, ~~RGA has~~certain subsidiaries have also committed to provide capital support to a ~~third-party,~~third party, in exchange for a fee, by agreeing to assume real estate leases in the event of a severe and prolonged decline in the commercial lease market. Upon assumption of a lease, ~~RGA~~the Company would recognize a ~~right-of-use~~right to use asset and lease obligation. As of ~~June 30, 2020,~~March 31, 2021, the Company does not believe that it will be required to provide any funding under these commitments as the occurrence of the defined events is considered remote. The following table presents the maximum potential obligation for these commitments as of ~~June 30, 2020~~March 31, 2021 (dollars in millions):


Commitment Period	Maximum Potential Obligation
2034	$	1,243
2035	2,458
2036	3,599
2037	2,850
2038	2,300
2039	11,351
2046	3,000

Commitment Period: Maximum Potential Obligation
2035 2,627
2036 3,408
2037 2,850
2038 2,300
2039 11,350

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 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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, are reflected in the following table (dollars in millions):

June 30, 2020 December 31, 2019
Treaty guarantees $ 1,719
$ 1,821
Treaty guarantees, net of assets in trust 829
891
Securities borrowing and repurchase arrangements 271
275
Financing arrangements 24
42


	March 31, 2021		December 31, 2020
Treaty guarantees	$	2,023	$	1,934
Treaty guarantees, net of assets in trust	1,092		961
Securities borrowing and repurchase arrangements	134		133

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Tax provision at U.S. statutory rate $ 41
$ 55
$ 21
$ 100
Increase (decrease) in income taxes resulting from:
Tax rate differences on income in other jurisdictions 8
1
13
1
Differences in tax bases in foreign jurisdictions (17 ) (6 ) (13 ) (21 )
Deferred tax valuation allowance 8
5
3
23
Amounts related to uncertain tax positions 1
2
7
3
Corporate rate changes —
—
—
(2 )
Equity based compensation 1
(4 ) —
(5 )
Return to provision adjustments (2 ) 3
(1 ) 4
Accrued Expenses (4 ) 1
(1 ) 1
Other, net 1
1
—
1
Total provision for income taxes $ 37
$ 58
$ 29
$ 105
Effective tax rate 18.9 % 22.1 % 28.6 % 21.9 %

the Company recorded income tax benefit of $(8) million on pre-tax loss of $(96) million, or an effective tax rate of 8.9%. The effective tax rate ~~for~~on the second quarter and first six months of 2020 differed from the U.S. Statutory rate of 21.0% primarily as a result of benefits from differences in bases in foreign jurisdictions, increases to the valuation allowance, return to provision adjustments, and accruals related to uncertain tax positions.

~~The effective tax rate for the second quarter and first six months of 2019 were higher~~pre-tax loss was lower than the U.S. Statutory rate of ~~21.0%~~21% primarily as a result of ~~valuation allowances established on losses~~income earned in ~~foreign~~ jurisdictions ~~accrual of~~with tax rates higher than the U.S. and tax expense related to uncertain tax positions, ~~and return to provision adjustments. These expenses were~~which was partially offset by ~~benefits from differences~~valuation allowance releases in ~~bases in foreign jurisdictions and excess tax benefits related to equity compensation.~~various jurisdictions.

10. Employee Benefit Plans

The components of net periodic benefit cost, included in other operating expenses on the Company’s condensed consolidated statements of income, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (dollars in millions):

Pension Benefits Other Benefits
Three months ended June 30, Three months ended June 30,
2020 2019 2020 2019
Service cost $ 4
$ 3
$ 1
$ 1
Interest cost 1
2
1
1
Expected return on plan assets (3 ) (1 ) —
—
Amortization of prior service cost (credit) —
—
(1 ) (1 )
Amortization of prior actuarial losses 1
1
1
—
Net periodic benefit cost $ 3
$ 5
$ 2
$ 1


	Pension Benefits				Other Benefits
	Three months ended March 31,				Three months ended March 31,
	2021		2020		2021		2020
Service cost	$	4	$	3	$	1	$	0
Interest cost	1		2		0		1
Expected return on plan assets	(2)		(2)		0		0
Amortization of prior service cost (credit)	0		0		0		0
Amortization of prior actuarial losses	1		1		0		0

Net periodic benefit cost	$	4	$	4	$	1	$	1

Pension Benefits Other Benefits
Six months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Service cost $ 7
$ 6
$ 1
$ 2
Interest cost 3
3
2
1
Expected return on plan assets (5 ) (3 ) —
—
Amortization of prior service cost (credit) —
—
(1 ) (1 )
Amortization of prior actuarial losses 2
2
1
1
Net periodic benefit cost $ 7
$ 8
$ 3
$ 3

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11. Reinsurance


~~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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~June 30, 2020 and December~~March 31, ~~2019,~~2021, all rated retrocession pool participants followed by the A.M. Best Company were rated “A- (excellent)” or better. The Company verifies retrocession pool participants’ ratings on a quarterly basis. For a majority of the retrocessionaires that were not rated, security in the form of letters of credit or trust assets has been posted. In addition, the Company performs annual financial reviews of its retrocessionaires to evaluate financial stability and performance.

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 ~~June 30, 2020~~March 31, 2021 or December 31, ~~2019~~2020 (dollars in millions):

June 30, 2020 December 31, 2019
Reinsurer A.M. Best Rating Amount % of Total Amount % of Total
Reinsurer A A+ $ 400
42.3 % $ 367
40.6 %
Reinsurer B A+ 201
21.3
208
23.0
Reinsurer C A 70
7.4
84
9.3
Reinsurer D A++ 49
5.2
53
5.9
Reinsurer E A+ 46
4.9
43
4.8
Other reinsurers 179
18.9
149
16.4
Total $ 945
100.0 % $ 904
100.0 %


		March 31, 2021				December 31, 2020
Reinsurer	A.M. Best Rating	Amount		% of Total		Amount		% of Total
Reinsurer A	A+	$	463	42.5	%	$	420	42.7	%
Reinsurer B	A+	222		20.4		216		22.0
Reinsurer C	A	78		7.2		64		6.5
Reinsurer D	A++	66		6.1		55		5.6
Reinsurer E	A+	49		4.5		46		4.7
Other reinsurers		211		19.3		182		18.5
Total		$	1,089	100.0	%	$	983	100.0	%

Included in the total reinsurance ceded receivables balance were ~~$274~~$216 million and ~~$223~~$278 million of claims recoverable, of which ~~$15~~$11 million and ~~$15~~$10 million were in excess of 90 days past due, as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.


~~12.~~	~~Policy Claims and Benefits~~

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,
2020 2019
Balance at beginning of year $ 6,786
$ 6,585
Less: reinsurance recoverable (564 ) (433 )
Net balance at beginning of year 6,222
6,152
Incurred:
Current year 5,740
5,457
Prior years 59
58
Total incurred 5,799
5,515
Payments:
Current year (1,332 ) (1,063 )
Prior years (3,903 ) (3,979 )
Total payments (5,235 ) (5,042 )
Other changes:
Interest accretion 18
13
Foreign exchange adjustments (142 ) 3
Total other changes (124 ) 16

Net balance at end the period 6,662
6,641
Plus: reinsurance recoverable 633
525
Balance at end of the period $ 7,295
$ 7,166


	Three months ended March 31,
	2021		2020
Balance at beginning of year	$	7,556	$	6,786
Less: reinsurance recoverable	(641)		(564)
Net balance at beginning of year	6,915		6,222
Incurred:
Current year	4,097		2,838
Prior years	(59)		11
Total incurred	4,038		2,849
Payments:
Current year	(164)		(131)
Prior years	(3,196)		(2,342)
Total payments	(3,360)		(2,473)
Other changes:
Interest accretion	10		9
Foreign exchange adjustments	(51)		(283)
Total other changes	(41)		(274)

Net balance at end of period	7,552		6,324
Plus: reinsurance recoverable	732		580
Balance at end of period	$	8,284	$	6,904

Incurred claims associated with prior periods are primarily due to events, related to long-duration business, which were incurred in prior periods but were reported in the current period, and to a lesser extent, the development of short-duration business

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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.

4113. New Accounting Standards

~~Table of Contents~~


~~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 will be used in part to repay the Company’s $400 million 5.000% Senior Notes due in 2021, and the remainder will be used for general corporate purposes. Capitalized issue costs were approximately $5 million.

On ~~May 15, 2019, RGA issued 3.9% Senior Notes due~~ ~~May 15, 2029~~, with a face amount of $600 million. The net proceeds were approximately $594 million and were used in part to repay upon maturity the Company’s $400 million 6.45% Senior Notes that matured in November 2019. The remainder were 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.

~~Table of Contents~~



Description			Date of Adoption		Effect on the Consolidated Financial Statements
Standards adopted:
~~Leases~~ This 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. Early adoption is permitted.			~~January 1, 2019~~	This guidance was adopted by applying the optional transition method. The adoption of the standard did not have a material impact on the Company’s results of operations or financial position. The adoption of the updated guidance resulted in the Company recognizing a right-to-use asset and lease liability of $55 million included in other assets and other liabilities, respectively, in the condensed consolidated balance sheets.
~~Derivatives and Hedging~~ This 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. Early adoption is permitted.	~~January 1, 2019~~	This guidance was adopted by applying a modified retrospective approach to existing hedging relationships as of the date of adoption. The adoption of the new standard did not have a material impact on the Company’s results of operations or financial position. Upon adoption of the guidance, the Company recorded an immaterial adjustment to retained earnings as of the beginning of the first reporting period in which the guidance was effective and modified some disclosures.
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. ~~See Note 1 – “Business and Basis of Presentation” for more information.~~
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 On July 27, 2017, the Financial Conduct Authority (the “FCA”) announced that it intends to stop persuading or compelling banks to submit London Interbank Offered Rates (“LIBOR”) after December 31, 2021. In addition, separate workstreams are underway in Europe and the U.S. to reform existing reference rates and provide a fall back rate upon discontinuation of LIBOR. During 2019, the Alternative Rates Committee of the Federal Reserve Board proposed the Secured Overnight Financing Rate (“SOFR”) as an alternative rate to replace U.S. Dollar LIBOR, and the European Central Bank recommended the Euro Short-term Rate (“ESTER”) as the new risk-free rate. Other jurisdictions are conducting similar exercises as well. This ~~new~~ 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		~~This guidance does~~The reference rate reform is not expected to have ~~any~~material accounting consequences. The Company has ~~put together~~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.~~ strategies, systems and operations.

4335



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 currently effective for annual and interim reporting periods beginning January 1, 2022. The FASB has tentatively agreed to defer the effective date by one year. Upon issuance of a final standard, the new guidance will be effective for annual and interim reporting periods beginning January 1, 2023. Below are the most significant areas of change:	January 1, 2023	See each significant area of change below for the method of adoption and expected impact to the Company’s results of operations and financial position.
Cash flow assumptions for measuring liability for future policy benefits The new guidance requires insurers to review, and if necessary, update the cash flow assumptions used to measure liabilities for future policy benefits periodically. The change in the liability estimate as a result of updating cash flow assumptions will be recognized in net income.		Cash flow assumptions for measuring liability for future policy benefits The Company will likely adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact.
Discount rate assumption for measuring liability for future policy benefits The new guidance requires insurers to update the discount rate assumption used to measure liabilities for future policy benefits at each reporting period, and the discount rate utilized must be based on an upper-medium grade fixed income instrument yield. The change in the liability estimate as a result of updating the discount rate assumption will be recognized in other comprehensive income.		Discount rate assumption for measuring liability for future policy benefits The Company will likely adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact.
Market risk benefits The new guidance created a new category of benefit features called market risk benefits that will be measured at fair value with changes in fair value attributable to a change in the instrument-specific credit risk recognized in other comprehensive income.		Market risk benefits The Company will adopt this guidance on a retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact.
Amortization of deferred acquisition costs (“DAC”) and other balancesThe 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.

Table of Contents

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, financial performance and growth potential of the Company. Forward-looking statements often contain words and phrases such as “intend,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “should,” “believe” and other similar expressions. Forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements are not a guarantee of future performance and are subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.

The effects of the ~~ongoing novel coronavirus (“COVID-19”)~~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. Further, any estimates, projections, illustrative scenarios or frameworks used to plan for potential effects of the pandemic are dependent on numerous underlying assumptions and estimates that may not materialize. Additionally, numerous other important factors (whether related to, resulting from or exacerbated by the COVID-19 pandemic or otherwise) could also cause ~~actual~~ results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: (1) adverse changes in mortality, morbidity, lapsation or claims experience, (2) inadequate risk analysis and underwriting, (3) adverse capital and credit market conditions and their impact on the Company’s liquidity, access to capital and cost of capital, (4) changes in the Company’s financial strength and credit ratings and the effect of such changes on the Company’s future results of operations and financial condition, (5) the availability and cost of collateral necessary for regulatory reserves and capital, (6) requirements to post collateral or make payments due to declines in market value of assets subject to the Company’s collateral arrangements, (7) action by regulators who have authority over the Company’s reinsurance operations in the jurisdictions in which it operates, (8) the effect of the Company parent’s status as an insurance holding company and regulatory restrictions on its ability to pay principal of and interest on its debt obligations, (9) general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in the Company’s current and planned markets, (10) the impairment of other financial institutions and its effect on the Company’s business, (11) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (12) market or economic conditions that adversely affect the value of the Company’s investment securities or result in the impairment of all or a portion of the value of certain of the Company’s investment securities, that in turn could affect regulatory capital, (13) market or economic conditions that adversely affect the Company’s ability to make timely sales of investment securities, (14) risks inherent in the Company’s risk management and investment strategy, including changes in investment portfolio yields due to interest rate or credit quality changes, (15) the fact that the determination of allowances and impairments taken on the Company’s investments is highly subjective, (16) the stability of and actions by governments and economies in the markets in which the Company operates, including ongoing uncertainties regarding the amount of U.S. sovereign debt and the credit ratings thereof, (17) the Company’s dependence on third parties, including those insurance companies and reinsurers to which the Company cedes some reinsurance, third-party investment managers and others, (18) financial performance of the Company’s clients, (19) the threat of natural disasters, catastrophes, terrorist attacks, epidemics or pandemics anywhere in the world where the Company or its clients do business, (20) competitive factors and competitors’ responses to the Company’s initiatives, (21) development and introduction of new products and distribution opportunities, (22) execution of the Company’s entry into new markets, (23) integration of acquired blocks of business and entities, (24) interruption or failure of the Company’s telecommunication, information technology or other operational systems, or the Company’s failure to maintain adequate security to protect the confidentiality or privacy of personal or sensitive data ~~and intellectual property~~ stored on such systems, (25) adverse litigation or arbitration results, (26) the adequacy of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of business, (27) changes in laws, regulations, and accounting standards applicable to the Company or its business, (28) the effects of the Tax Cuts and Jobs Act of 2017 may be different than expected and (29) other risks and uncertainties described in this document and in the Company’s other filings with the Securities and Exchange Commission (“SEC”).

Forward-looking statements should be evaluated together with the many risks and uncertainties that affect the Company’s business, including those mentioned in this document and described in the periodic reports the Company files with the SEC. These forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update these forward-looking statements, even though the Company’s situation may change in the future. For a discussion of these risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, you are advised to see Item 1A – “Risk Factors” in the ~~2019~~2020 Annual Report, as may be supplemented by Item ~~1A-~~1A – “Risk Factors” in the Company’s subsequent Quarterly Reports on Form 10-Q.

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Overview

The Company is among the leading global providers of life reinsurance and financial solutions, with ~~$3.5~~$3.4 trillion of life reinsurance in force and assets of ~~$80.7~~$84.8 billion as of ~~June 30, 2020.~~March 31, 2021. Traditional reinsurance includes individual and group life and health, disability, and critical illness reinsurance. Financial solutions includes longevity reinsurance, asset-intensive reinsurance, capital solutions, including financial reinsurance and 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 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.

~~For its traditional business, the~~The Company’s long-term profitability largely depends on the volume and amount of ~~death-and~~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 ~~capital solutions transactions, such as~~ 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.

~~The COVID-19 Pandemic Impact and Update~~

The ongoing COVID-19 global pandemic and the response to it has caused, and will continue to cause, increases in mortality, morbidity and other insurance risks, as well as significant disruption in the international and U.S. economies and financial markets. The extent to which the Company’s future results continue to be affected by COVID-19 will largely depend on, among other factors, country-specific circumstances, measures by public and private institutions, COVID-19’s impact on all other causes of death and the timing of effective treatments and/or a vaccine for COVID-19. Given these many variables, the Company cannot reliably predict the future impact of the pandemic on its business, results of operations and financial condition. In addition, clients’ ability to write new business in this environment may result in a slowdown in the Company’s new business temporarily, however, much of the Company’s premiums and other revenues are contractually recurring for many years to come.

One of the Company’s priorities continues to be the safety and well-being of its employees and clients, as such its business continuity plans are still activated and the actions taken 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 currently experienced any significant disruptions to its daily operations, despite most of its workforce continuing to work remotely. Expenses incurred to implement its business continuity plans, including work from home arrangements, are not material and have been more than offset by reduced travel and other expenses during the three and six months ended June 30, 2020. However, COVID-19 may create 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. The Company is heavily reliant on timely reporting from its clients and other third parties. While operational risks, including privacy and cybersecurity risks, are heightened during remote working situations the Company has implemented increased communication related to these risks to all its workforce and continues to monitor its programs, processes and procedures designed to manage these risks.

Given the many variables and uncertainties in the amounts and timing of claims, the Company is unable to reliably predict the ultimate claims it will experience as a result of the pandemic, however an infectious pandemic will negatively impact the profitability of the Company’s life and health business due to increased claims. The variables and uncertainties include age, gender, comorbidities, other insured versus general population characteristics, geography-specific institutional and individual mitigating

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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.

Following revisions to the Company’s model, based on updated external data and the Company’s claim experience to date, which revised models are subject to the many variables and uncertainties noted above, the financial impact of COVID-19 on the Company is projected to be lower than previous estimates for the same level of general population deaths. The U.S. is expected to continue being the key driver of mortality claim costs, followed by the UK and Canada. Utilizing the Company’s updated model and assuming, beginning in the third quarter, an additional 200,000 U.S future general population deaths, 50,000 future general population deaths in the UK, 10,000 future general population deaths in Canada as well as representative amounts in the Company’s other global markets, the resulting impact on the Company is estimated to be an additional $400 million to $600 million of pre-tax mortality claim costs beginning in the third quarter. These estimates assume that all COVID-19 claims are marginal extra claims and not accelerations of claims. In addition, the Company’s longevity business is expected to act as a modest offset to excess life reinsurance claims and has not been netted from the estimates above. For the three months ended June 30, 2020, the Company estimates it has incurred $300 million of COVID-19 related life and health claim costs, including amounts incurred but not reported, with approximately $240 million of that amount being associated with U.S. Individual Mortality.However, as is normally the case, a more in depth review of claims will occur as clients provide additional information regarding cause of death in subsequent months. In some cases, cause of death may not specifically be identified as COVID-19 related even though such may be the case. The Company did experience a higher incidence of older age death claims in the U.S. during the three and six months ended June 30, 2020, and the highest mortality ratios were in states with the highest general population COVID-19 deaths. Additional analysis and information from clients will allow the Company to refine the impact of COVID-19 on current quarter and year to date results.

The global financial markets 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 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 Company expects to incur a higher-than-normal level of investment impairments during the remainder of 2020, however it is unable to predict the amount of such impairments. The level of such impairments will depend on broad economic conditions and the pace at which global economies recover from the effects of COVID-19. The Company recognized $34 million of impairment losses and changes in the credit allowance for its available-for-sale fixed maturities for the six months ended June 30, 2020. The net impact to the credit allowance for available-for-sale fixed maturity securities was immaterial for the second quarter as new allowances were offset by sales and improved fair values on previously impaired securities.The valuation allowance on mortgage loans increased by $17 million and $30 million for the three and six month ended June 30, 2020, respectively. During the second quarter the Company recognized $5 million of impairments on limited partnerships. In addition, the Company may experience a short-term decrease in cash flows from its commercial mortgage loan portfolio as it assists borrowers that are affected by the current economic environment. See “Investments” for more information.

The Company’s liquidity is monitored and managed on a daily basis to ensure all current and future liquidity demands can be met, and that it maintains access to liquidity resources to meet even extreme tail risk liquidity needs. In addition, RGA maintains a number of arm’s length arrangements for mobilizing liquidity throughout the group. Like many companies, liquidity is being enhanced by holding more cash received in the course of its normal operating and investing activities. The Company also suspended common stock repurchases until further notice.

~~Key liquidity resources available to the group include:~~

~~Holdings of cash and cash equivalents of $4.3 billion as of June 30, 2020,~~

~~Cash flows from investments, which is approximately $2 billion per year,~~

~~Access to $850 million of cash through the Company’s committed syndicated credit facility, and~~

~~Access to over $500 million of cash through the membership in the Federal Home Loan Bank of Des Moines.~~

In order to further enhance its capital and liquidity position, the Company executed two capital market transactions during the quarter. On June 5, 2020, the Company completed an offering of its common stock and received net proceeds of approximately $481 million. On June 9, 2020, the Company completed the offering of $600 million aggregate principal amount of its 3.150% Senior Notes due 2030 (the “Senior Notes”), which will be used to repay the $400 million 5.000% senior notes due 2021 and for general corporate purposes. The public offering price of the Senior Notes was 99.472% of the principal amount, and the Company received net proceeds of approximately $593 million.

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~~Additional sources of liquidity for RGA’s operating subsidiaries include near-term reinsurance cash flows, sales of invested assets, and potentially other forms of borrowing.~~

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.

The Company’s primary insurance subsidiaries’ financial strength ratings are strong, with all having an S&P rating of AA-, and some of those also having a Moody’s rating of A1, and an A.M. Best rating of A+. In addition, even though the insurance subsidiaries’ various capital ratios and solvency measures may be somewhat weakened due to the COVID-19 pandemic and the economic environment, RGA believes its various subsidiaries would remain financially solvent under such a pandemic scenario. Reinsurance treaties, whether facultative or automatic, generally provide recapture provisions. Most U.S. based reinsurance treaties include a recapture right for ceding companies, generally after 10 years. Outside of the U.S., treaties primarily include a mutually agreed-upon recapture provision. Recapture rights permit the ceding company to reassume all or a portion of the risk formerly ceded to the reinsurer. In some situations, the Company has the right to place assets in trust for the benefit of the ceding company in lieu of recapture. Additionally, certain treaties may grant recapture rights to ceding companies in the event of a significant decrease in RGA Reinsurance Company’s NAIC risk based capital ratio or financial strength rating. The RBC ratio trigger varies by treaty, with the majority between 125% and 225% of the NAIC’s company action level. Financial strength rating triggers vary by reinsurance treaty with the majority of the triggers reached if the specific legal entity’s financial strength rating falls five notches from its current rating of “AA-” to the “BBB” level on the S&P scale. Similar solvency and ratings based on recapture rights exist on treaties with other operating companies. Recapture of business previously ceded does not affect premiums ceded prior to the recapture of such business, but would reduce premiums and insurance liabilities in subsequent periods. Upon recapture, the Company would reflect a net gain or loss on the settlement of the assets and liabilities associated with the reinsurance treaty. In some cases, the ceding company is required to pay the Company a recapture fee.

Globally, regulators are closely monitoring the COVID-19 pandemic and its possible impact on the insurance industry. Various regulators and other authorities have been requiring regulated entities to review their business continuity plans and to address potential pandemic risk in their contingency plans. In addition, some regulators have adopted or are considering adopting measures to provide temporary relief in respect to certain regulatory requirements and also to policyholders. These regulatory initiatives have accompanied a range of measures by governments and central banks, such as interest rate cuts and other measures, in a number of jurisdictions to support and stimulate the economy. The Company expects that regulators and other authorities will continue monitoring the spread and effects of COVID-19 closely over the next few months and adapt their guidance and additional requirements as the situation develops.

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 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 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 ~~2019~~2020 Annual Report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.

”

Consolidated Results of Operations

~~The following table summarizes net income for the periods presented.~~

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Revenues: (Dollars in millions, except per share data)
Net premiums $ 2,790
$ 2,764
$ 5,609
$ 5,502
Investment income, net of related expenses 645
584
1,239
1,164
Investment related gains (losses), net:
Impairments and change in allowance for credit losses on fixed maturity securities —
—
(34 ) (9 )
Other investment related gains (losses), net 81
12
(170 ) 29
Investment related gains (losses), net 81
12
(204 ) 20
Other revenues 90
107
166
201
Total revenues 3,606
3,467
6,810
6,887
Benefits and Expenses:
Claims and other policy benefits 2,700
2,516
5,364
5,024
Interest credited 187
158
333
291
Policy acquisition costs and other insurance expenses 290
260
538
572
Other operating expenses 188
222
383
424
Interest expense 42
43
83
83
Collateral finance and securitization expense 4
8
10
16
Total benefits and expenses 3,411
3,207
6,711
6,410
Income before income taxes
195
260
99
477
Provision for income taxes 37
58
29
105
Net income $ 158
$ 202
$ 70
$ 372
Earnings per share:
Basic earnings per share $ 2.49
$ 3.23
$ 1.12
$ 5.93
Diluted earnings per share $ 2.48
$ 3.18
$ 1.11
$ 5.83

Consolidated income before income taxes decreased $65 million, and $378 million, for the three and six months ended June 30, 2020, respectively, as compared to the same periods in 2019. The decrease in income for the second quarterImpacts of ~~2020 was primarily due to increased mortality claims in the U.S. and Latin America Traditional segment, some of which are attributable to~~ the COVID-19 ~~pandemic.~~ Pandemic

The ~~unfavorable mortality claims in the U.S. were partially offset by favorable morbidity results across all segments and an increase in income before taxes~~COVID-19 global pandemic continues to cause increases in the Company’s ~~Financial Solutions~~claims costs, primarily relating to its mortality business. However, the Company cannot reliably predict the future impact of the pandemic on its business, results of operations and financial condition as the impact will largely depend on, among other factors, the impact of new variants of the virus, successful rollout of the vaccination programs globally, country-specific circumstances, measures by public and private institutions, and COVID-19’s impact on all other causes of death. In addition, clients’ ability to ~~increased mortality claims~~

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write new business in this environment may result in a slowdown in the ~~U.S.~~Company’s new business temporarily; however, much of the Company’s premiums and ~~Latin America Traditional segment, income~~other revenues are contractually recurring for many years to come.

The ultimate amount and timing of claims the Company will experience as a result of the COVID-19 pandemic will be dependent on many variables and uncertainties. These variables and uncertainties include those discussed above, in addition to age, gender, comorbidities, other insured versus general population characteristics, geography-specific institutional and individual mitigating actions, medical capacity, and other factors. To date, general population COVID-19 deaths have been heavily concentrated in individuals aged 70 and older and with pre-existing comorbidities. The Company’s insured population has lower exposure to older ages than the general population and covers a generally healthier population due to underwriting and socioeconomic factors of those purchasing insurance. In addition, the Company’s longevity business may act as a modest offset to excess life insurance claims.

The Company’s COVID-19 projection and financial impact models continue to be updated and refined based on updated external data and the Company’s claim experience to date and are subject to the many variables and uncertainties noted above. Although it varies from country to country, the overall financial impact of COVID-19 on the Company is currently projected to be within the range of previous estimates for the ~~first six months~~same level of ~~2020 reflects unfavorable changes in investment related gain (losses) resulting from changes in~~general population deaths as there continues to be significant differences between general and insured population mortality. The U.S. is the ~~fair value~~key driver of ~~embedded derivatives on modco or funds withheld treaties within~~mortality claim costs followed by the ~~U.S. segment due to changes in interest rates~~UK, Canada and ~~credit spreads primarily attributable to~~South Africa. For the ~~recent disruption in the global financial markets caused by COVID-19. The effect of the change in fair value of these embedded derivatives on income is discussed below.~~ ~~As discussed in “The COVID-19 Impact and Update” above,~~three month period ended March 31, 2021, the Company estimates it has incurred ~~$300~~approximately $485 million of COVID-19 related life and health claim costs, including amounts incurred but not reported, with approximately ~~$240~~$358 million of that amount being associated with the U.S. ~~Individual Mortality.~~and Latin America Traditional segment. The Company ~~did experience a higher incidence of older age death claims~~estimates that every additional 10,000 population deaths in the U.S., UK, or Canada as a result of COVID-19 would result in the following corresponding excess mortality claims of approximately:

•$15 million to $25 million in the U.S.;

•$4 million to $6 million in the UK; and

•$10 million to $15 million in Canada.

While the global financial markets stabilized since the beginning of the pandemic, they continue to be in a state of uncertainty due to COVID-19 mandated economic shutdowns and historically large and rapid central bank and fiscal policies meant to offset the economic impact of the pandemic. The economic weakness and uncertainty caused by these events may also adversely affect the Company’s financial performance. All investments held by the Company, directly or in a funds withheld at

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interest reinsurance arrangement, are monitored for conformance with the Company’s stated investment policy limits as well as any limits prescribed by the applicable jurisdiction’s insurance laws and regulations. The current market environment may result in certain investments being downgraded which can affect conformance with these limits. The level of potential impairments will depend on broad economic conditions and the pace at which global economies recover from the effects of COVID-19 and the response thereto. See “Investments” for more information.

The safety and well-being of the Company’s employees and clients continues to be a priority. The Company’s business continuity plans remain activated and the actions taken during 2020 to protect both employees and clients, such as working from home, restricting travel, conducting meetings remotely, and reinforcing the importance of face coverings, good hygiene and social distancing, also continue. The Company’s offices worldwide are at a minimum adhering to local government mandates and guidelines regarding occupancy levels; however, in certain situations the Company’s guidelines are more restrictive than those of local governments.

The Company has not experienced any significant disruptions to its daily operations, despite most of its workforce working remotely. However, COVID-19 heightened operational risks and related impacts, which may include a reduction in new business volumes from slower sales, impacts to the Company’s workforce productivity due to travel restrictions, temporary office closures and increased remote working situations, and potential client delays in paying premiums and reporting claims. Similar to other reinsurers, the Company is heavily reliant on timely reporting from its clients and other third parties. The Company continues to emphasize awareness and training regarding operational risks, including privacy and cybersecurity risks, as such risks are heightened during remote working situations. In addition, the Company continues to monitor its programs, processes and procedures designed to manage these risks.

Results from Operations – 2021 compared to 2020

The following table summarizes net income for the periods presented.


For the three months ended March 31,
(Dollars in millions, except per share data)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	2,914	$	2,819	$	95
Investment income, net of related expenses	812		594		218
Investment related gains (losses), net:
Impairments and change in allowance for credit losses on fixed maturity securities	(2)		(34)		32

Other investment related gains (losses), net	304		(251)		555
Total investment related gains (losses), net	302		(285)		587
Other revenues	91		76		15
Total revenues	4,119		3,204		915
Benefits and Expenses:
Claims and other policy benefits	3,192		2,664		528
Interest credited	146		146		—
Policy acquisition costs and other insurance expenses	333		248		85
Other operating expenses	214		195		19
Interest expense	45		41		4
Collateral finance and securitization expense	3		6		(3)
Total benefits and expenses	3,933		3,300		633
Income (loss) before income taxes	186		(96)		282
Provision for income taxes	47		(8)		55
Net income (loss)	$	139	$	(88)	$	227
Earnings per share:
Basic earnings per share	$	2.04	$	(1.41)	$	3.45
Diluted earnings per share	$	2.03	$	(1.41)	$	3.44

The increase in income for the three months ended ~~June 30, 2020, while~~March 31, 2021 was primarily the ~~cause~~result of:

•A one-time adjustment of ~~death information is not yet available~~$162 million, pretax, associated with prior periods that includes $92 million, pretax, to correct the accounting for ~~all~~equity method limited partnerships to reflect unrealized gains in investment income, net of

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related expenses that were previously included in accumulated other comprehensive income, and a $70 million, pretax, correction reflected in other investment related gains (losses), net to adjust the carrying value of certain limited partnerships from cost less impairments to a fair value approach, using the net asset value (“NAV”) per share or its equivalent.

•$144 million, pretax, of capital gains included in other investment related gains (losses), net associated with portfolio repositioning.

•Changes in the fair value of embedded derivatives, associated with modco/funds withheld treaties, increased investment related gains by $50 million for the three month period ended March 31 2021, compared to a decrease of $230 million for the three month period ended March 31, 2020.

•The increases in investment income and investment related gains (losses), net were partially offset by unfavorable mortality claims, primarily in the ~~Company’s analysis attributes excess~~U.S. and Latin America and EMEA segments.

•As discussed in the “Impacts of the COVID-19 Pandemic” above, the Company estimates it has incurred approximately $485 million, pretax, of COVID-19 related life and health claim costs, ~~to COVID-19 or COVID-19 related factors~~including amounts incurred but not reported, with approximately $358 million, pretax, in the U.S. and ~~therefore additional analysis and information from clients will allow the Company to refine the impact of COVID-19 on current quarter and year to date results.~~ Latin America segment.

Foreign currency fluctuations ~~relative to~~can result in variances in the ~~prior year decreased~~financial statement line items. Foreign currency exchange fluctuation did not have a material impact on income before ~~income~~ taxes ~~by $6 million in the second quarter and decreased income by $2 million in the first six months of 2020, as compared to the same periods in 2019.~~

~~Consolidated net premiums increased $26 million, or 1%, and 107 million, or 1.9%,~~ for the three ~~and six~~ months ended ~~June 30, 2020, as compared to the same periods~~March 31, 2021. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Premiums and business growth

The increase in ~~2019,~~premiums is primarily due to growth in life reinsurance in force. ~~Foreign currency fluctuations decreased net premiums by $45 million and $78 million in the second quarter and the first six months of 2020, as compared to the same periods in 2019.~~ Consolidated assumed life insurance in force increased to ~~$3,457.8~~$3,428.6 billion as of ~~June 30, 2020,~~March 31, 2021, from ~~$3,377.2~~$3,412.4 billion as of ~~June 30, 2019,~~March 31, 2020, due to new business production and in force ~~transactions.~~transactions offset by an increase in lapses and mortality claims in the current period, primarily attributable to the increased claims as result of the ongoing COVID-19 pandemic. The Company added new business production, measured by face amount of insurance in force, of ~~$116.1~~$77.9 billion, and ~~$70.4~~$94.8 billion during the ~~second quarter~~three months ended March 31, 2021 and 2020, respectively.

Investment income, net of ~~2020~~related expenses and ~~2019, respectively,~~investment related gains and ~~$210.9 billion and $149.7 billion during the first six months of 2020 and 2019, respectively.~~losses

~~Consolidated~~The increase in investment income, net of related expenses ~~increased $61 million, or 10.4%, and $75 million, or 6.4%, for the three and six months ended June 30, 2020, as compared~~is primarily attributable to the ~~same periods~~aforementioned accounting correction associated with equity method limited partnerships, in ~~2019. The increases are primarily attributable~~addition to an increase in the average invested asset ~~base. Investment income is affected by changes in the fair value of the Company’s funds withheld at interest assets associated with the reinsurance of certain EIA products.~~ base and yield:

•The re-measurement of these funds withheld assets decreased investment income by $7 million in the second quarter and decreased investment income by $19 million in the first six months of 2020. 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.

~~Average~~average invested assets at amortized cost, excluding spread related business, ~~for the six months ended June 30,~~totaled $33.4 billion and $29.7 billion in 2021 and 2020, ~~were $30 billion, a 6.4% increase over June 30, 2019.~~ respectively.

•The average yield earned on investments, excluding spread related business, was ~~4.07%~~5.67% and ~~4.38%~~4.08% for the ~~second quarter of~~three-month periods ended March 31, 2021 and 2020, ~~and 2019, respectively, and 4.07% and 4.43% for the six months ended June 30, 2020 and 2019,~~ 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, make-whole premiums and changes in the mix of the underlying investments and cash balances, and the timing of dividends and distributions on certain investments.

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.

~~Total investment related gains (losses), net were $81 million~~ The average yield will vary from year to year depending on several variables, including the prevailing risk-fee interest rate and ~~$12 million for~~credit spread environment, prepayment fees and make-whole premiums, changes in the ~~second quarter of 2020 and 2019, respectively, and $(204) million and $20 million for the first six months of 2020 and 2019, respectively. A portion~~mix of the underlying investments and cash and cash equivalents balances. Variable investment income from joint ventures and limited partnerships, including unrealized gains and losses on certain limited partnerships, will also vary from year to year and can be highly variable based on equity-market performance, the timing of dividends and distributions on certain investments. Investment income is allocated to the operating segments based upon average assets and related capital levels deemed appropriate to support segment operations.

The increase in investment related gains (losses) ~~was offset by changes~~is primarily attributable to the following:

•During the three months ended March 31, 2021, the Company incurred $2 million of impairments and change in ~~the value of embedded derivatives related~~allowance for credit losses on fixed maturities compared 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,~~ ~~which fluctuated significantly~~$34 million during the ~~year as a result~~first three months of ~~the economic uncertainty and market disruptions caused by the COVID-19 pandemic~~2020.

•. Changes in the fair value of ~~these~~ embedded derivatives, associated with modco/funds withheld treaties, increased ~~(decreased)~~ investment related gains (losses) by ~~$1 million and $5 million for the second quarter of 2020 and 2019, respectively, and $(229) million and $3 million for the first six months of 2020 and 2019, respectively.~~ The Company recognized $34 million of impairment losses and changes in the credit allowance for its available-for-sale fixed maturities for the six months ended June 30, 2020, The net impact to the credit allowance for available-for-sale fixed maturity securities was immaterial for the second quarter as new allowances were offset by sales and improved fair values on previously impaired securities. The valuation allowance on mortgage loans increased by $17 million and $30$50 million for the three ~~and six~~ month period ended ~~June 30, 2020, respectively. The increase in both~~March 31 2021, compared to a decrease of $230 million for the ~~credit allowance for available-for-sale fixed maturity securities and~~three month period ended March 31, 2020.

•During the ~~valuation allowance on mortgage loans is primarily attributable~~three months ended March 31, 2021, the Company repositioned its portfolio generating capital gains of $144 million.

•Unrealized gains of $104 million, including the previously mentioned correction of $70 million due to the ~~economic uncertainty caused by COVID-19.~~ ~~See~~change in fair value of certain cost method limited partnerships were recognized during the ~~Investment section within Management Discussion and Analysis, Note 4~~ first three months of 2021.

– ~~“Investments” and Note 5~~ – ~~“Derivative Instruments” in the Notes to Condensed Consolidated Financial Statements for additional information on the impairment losses and derivatives.~~Table of Contents

The effective tax rate on a consolidated basis was ~~18.9%~~25.3% and ~~22.1%~~8.9% for the ~~second quarter~~three months ended March 31, 2021 and 2020, ~~and 2019, respectively, and 28.6% and 21.9% for the first six months of 2020 and 2019,~~ 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.~~rate.

~~Table~~Impact of ~~Contents~~

certain derivatives

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~~equity index annuities (“EIAs”) and variable annuities with guaranteed minimum benefit riders. The Company utilizes freestanding derivatives to minimize the income statement volatility due to changes in the fair value of embedded derivatives associated with guaranteed minimum benefit riders. The following table presents the effect of embedded derivatives and related freestanding derivatives on income before income taxes for the periods indicated (dollars in millions):


	Three months ended March 31,
	2021		2020		2021 vs. 2020
Modco/Funds withheld:
Unrealized gains (losses)	$	50	$	(230)	$	280
Deferred acquisition costs/retrocession	(17)		113		(130)
Net effect	33		(117)		150
EIAs:
Unrealized gains (losses)	29		(12)		41
Deferred acquisition costs/retrocession	(15)		8		(23)
Net effect	14		(4)		18
Guaranteed minimum benefit riders:
Unrealized gains (losses)	19		(128)		147
Related freestanding derivatives, net of deferred acquisition costs costs/retrocession	(54)		164		(218)
Net effect	(35)		36		(71)
Total net effect after freestanding derivatives	$	12	$	(85)	$	97

Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Modco/Funds withheld:
Unrealized gains (losses) $ 1
$ 5
$ (229 ) $ 3
Deferred acquisition costs/retrocession 2
(5 ) 115
(8 )
Net effect 3
—
(114 ) (5 )
EIAs:
Unrealized gains (losses) (7 ) (19 ) (19 ) (20 )
Deferred acquisition costs/retrocession 2
10
10
10
Net effect (5 ) (9 ) (9 ) (10 )
Guaranteed minimum benefit riders:
Unrealized gains (losses) 107
(18 ) (21 ) —
Related freestanding derivatives, net of deferred acquisition costs/retrocession (70 ) 21
94
2
Net effect 37
3
73
2
Total net effect after freestanding derivatives $ 35
$ (6 ) $ (50 ) $ (13 )

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,~~mortality risk, health and long-term care and to a lesser extent, group reinsurance. The Financial Solutions segment consists of Asset-Intensive and Capital Solutions. Asset-Intensive within the Financial Solutions segment includes coinsurance of annuities and corporate-owned life insurance policies and to a lesser extent, fee-based synthetic guaranteed investment contracts, which include investment-only, stable value ~~contracts and other longevity type products.~~ contracts. Capital Solutions within the Financial Solutions segment primarily involves assisting ceding companies in meeting applicable regulatory requirements by enhancing the ceding companies’ financial strength and regulatory surplus position through relatively low risk reinsurance and other transactions. Typically, these transactions do not qualify as reinsurance under GAAP, due to ~~their~~the low-risk nature ~~as such~~of the transactions, therefore only the related net fees are reflected in other revenues on the condensed consolidated statements of income.

For the three months ended June 30, 2020: Financial Solutions
(dollars in millions) Asset-Intensive Capital Solutions Total U.S. and Latin America
Traditional
Revenues:
Net premiums $ 1,454
$ 15
$ —
$ 1,469
Investment income, net of related expenses 177
241
2
420
Investment related gains (losses), net 7
15
—
22
Other revenues 4
24
26
54
Total revenues 1,642
295
28
1,965
Benefits and expenses:
Claims and other policy benefits 1,558
49
—
1,607
Interest credited 18
139
—
157
Policy acquisition costs and other insurance expenses 195
7
2
204
Other operating expenses 29
7
2
38
Total benefits and expenses 1,800
202
4
2,006
Income before income taxes $ (158 ) $ 93
$ 24
$ (41 )

For the three months ended June 30, 2019: Financial Solutions
(dollars in millions) Asset-Intensive Capital Solutions Total U.S. and Latin America
Traditional
Revenues:
Net premiums $ 1,410
$ 9
$ —
$ 1,419
Investment income, net of related expenses 173
204
1
378
Investment related gains (losses), net (4 ) 17
—
13
Other revenues 5
50
21
76
Total revenues 1,584
280
22
1,886
Benefits and expenses:
Claims and other policy benefits 1,293
49
—
1,342
Interest credited 19
124
—
143
Policy acquisition costs and other insurance expenses 180
25
(1 ) 204
Other operating expenses 37
10
3
50
Total benefits and expenses 1,529
208
2
1,739
Income before income taxes $ 55
$ 72
$ 20
$ 147

~~Table of Contents~~

For the six months ended June 30, 2020: Financial Solutions
(dollars in millions) Asset-Intensive Capital Solutions Total U.S. and Latin America
Traditional
Revenues:
Net premiums $ 2,827
$ 27
$ —
$ 2,854
Investment income, net of related expenses 338
474
3
815
Investment related gains (losses), net —
(145 ) —
(145 )
Other revenues 10
52
51
113
Total revenues 3,175
408
54
3,637
Benefits and expenses:
Claims and other policy benefits 2,925
102
—
3,027
Interest credited 37
268
—
305
Policy acquisition costs and other insurance expenses 370
(31 ) 2
341
Other operating expenses 63
14
5
82
Total benefits and expenses 3,395
353
7
3,755
Income before income taxes $ (220 ) $ 55
$ 47
$ (118 )

For the six months ended June 30, 2019: Financial Solutions
(dollars in millions) Asset-Intensive Capital Solutions Total U.S. and Latin America
Traditional
Revenues:
Net premiums $ 2,767
$ 16
$ —
$ 2,783
Investment income, net of related expenses 359
401
2
762
Investment related gains (losses), net (10 ) 18
—
8
Other revenues 9
73
46
128
Total revenues 3,125
508
48
3,681
Benefits and expenses:
Claims and other policy benefits 2,593
97
—
2,690
Interest credited 39
213
—
252
Policy acquisition costs and other insurance expenses 356
44
5
405
Other operating expenses 70
17
5
92
Total benefits and expenses 3,058
371
10
3,439
Income before income taxes $ 67
$ 137
$ 38
$ 242

~~Income before income taxes decreased by $188 million, and $360 million, for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~ The ~~decrease in~~following table summarizes income before income taxes for the Company’s U.S. and Latin America operations for the periods presented:


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	1,432	$	1,385	$	47
Investment income, net of related expenses	465		395		70
Investment related gains (losses), net	—		(167)		167
Other revenues	58		59		(1)
Total revenues	1,955		1,672		283
Benefits and expenses:
Claims and other policy benefits	1,800		1,420		380
Interest credited	131		148		(17)
Policy acquisition costs and other insurance expenses	231		137		94
Other operating expenses	48		44		4
Total benefits and expenses	2,210		1,749		461
Income (loss) before income taxes	$	(255)	$	(77)	$	(178)

The increase in loss before income taxes was the result of a significant increase in claims and other policy benefits in the U.S. Traditional segment. Partially offsetting the increase in losses was the impact of embedded derivatives in U.S. Financial Solutions as well as higher variable investment income, primarily generated from unrealized gains in the U.S. Traditional segment’s investments in limited partnerships. The significant increase in claims was primarily related to ~~a significant~~an increase in large and non-large claim frequency within the individual mortality business. While the cause of death is not yet available for all claims, the Company believes the excess claim costs are primarily attributable to ~~COVID-19 or COVID-19 related factors as~~ COVID-19.

~~the Company did experience a higher incidence~~Table of ~~older age death claims in the U.S. during the three months ended June 30, 2020, and the highest mortality ratios were in states with the highest general population COVID-19 deaths.~~Contents

Also, contributing to the six month variance were changes in the value of the embedded derivatives associated with reinsurance treaties structured on a modco or funds withheld basis. The volatility in the financial markets as a result of the COVID-19 pandemic, was the primary driver of this change.

Traditional Reinsurance

~~Income~~


For the three months ended March 31,
(dollars in millions)	2021			2020			2021 vs 2020
Revenues:
Net premiums	$	1,419		$	1,373		$	46
Investment income, net of related expenses	207			161			46
Investment related gains (losses), net	6			(7)			13
Other revenues	5			6			(1)
Total revenues	1,637			1,533			104
Benefits and expenses:
Claims and other policy benefits	1,740			1,367			373
Interest credited	17			19			(2)
Policy acquisition costs and other insurance expenses	182			175			7
Other operating expenses	36			34			2
Total benefits and expenses	1,975			1,595			380
Income (loss) before income taxes	$	(338)		$	(62)		$	(276)
Key metrics:
Life insurance in force	$1,610.2 billion			$1,618.4 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	122.6		%	99.6		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	12.8		%	12.7		%
Other operating expenses as a percentage of net premiums	2.5		%	2.5		%

The increase in loss before income taxes for the U.S. and Latin America Traditional segment ~~decreased by $213 million, and $287 million, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decreases were~~was primarily ~~related~~due to unfavorable ~~individual mortality~~claims experience ~~from a higher than expected count of claims. While~~within the cause of death is not yet available for all claims, the Company believes the excess claims are attributable to COVID-19 or COVID-19 related factors. In addition, the segment reported lower variable investment income year over year.Individual Mortality business.

~~Net premiums increased $44 million, or 3.1%, and $60 million, or 2.2%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~ Revenues

•The ~~increases~~increase in net premiums ~~in the second quarter and first six months were~~was primarily due to organic growth as well as new sales. The segment added new ~~individual~~ life business production, measured by face amount of insurance in force, of ~~$25.3~~$28.5 billion and ~~$24.7~~$34.0 billion ~~for the second quarter and $59.3 billion and $53.5 billion for the first six months of 2020 and 2019, respectively.~~

~~Table of Contents~~

~~Net investment income increased $4 million, or 2.3%, and decreased $21 million, or 5.8%, for~~during the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~as compared to the same periods in 2019.~~ respectively.

•The increase in ~~the second quarter~~net investment income was primarily due to a higher ~~asset base offset somewhat by lower~~ variable investment ~~income. The decrease~~income associated with investments in limited partnerships and private equity funds primarily generated from unrealized gains in the ~~first six months was primarily related to less variable investment income. Investment related gains (losses), net increased $11 million~~underlying investments.

Benefits and $10 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019 as result of changes in the fair value of embedded derivatives related to modified coinsurance and funds withheld treaties as a result of changes in interest rates and credit spreads.expenses

~~Claims and other policy benefits as a percentage of net premiums (“loss ratios”) were 107.2% and 91.7% for the second quarter and 103.5% and 93.7%, for the six months ended~~ •~~June 30, 2020~~ ~~and 2019, respectively.~~ The increase in the loss ratio for the ~~second quarter~~three months ended March 31, 2021, as compared to the same period in 2020, was primarily due to ~~a high frequency of~~unfavorable large and non-large claims experience in the individual mortality line of ~~business.~~business, attributed primarily to the COVID-19 pandemic. As explained above, while the cause of death is not yet available for all claims, the Company ~~believes the~~estimates that approximately $358 million of excess claims ~~are attributable to COVID-19 or COVID-19 related factors.~~

~~Interest credited expense decreased $1 million, or 5.3%, and $2 million, or 5.1%,~~ for the three ~~and six~~ months ended ~~June 30, 2020, as compared~~March 31, 2021, were attributable to ~~the same periods~~COVID-19.

Table of Contents

Financial Solutions


For the three months ended March 31,	2021						2020						2021 vs 2020
	Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total
(dollars in millions)
Revenues:
Net premiums	$	13	$	—	$	13	$	12	$	—	$	12	$	1	$	—	$	1
Investment income, net of related expenses	257		1		258		233		1		234		24		—		24
Investment related gains (losses), net	(6)		—		(6)		(160)		—		(160)		154		—		154
Other revenues	26		27		53		28		25		53		(2)		2		—
Total revenues	290		28		318		113		26		139		177		2		179
Benefits and expenses:
Claims and other policy benefits	60		—		60		53		—		53		7		—		7
Interest credited	114		—		114		129		—		129		(15)		—		(15)
Policy acquisition costs and other insurance expenses	47		2		49		(38)		—		(38)		85		2		87
Other operating expenses	9		3		12		7		3		10		2		—		2
Total benefits and expenses	230		5		235		151		3		154		79		2		81
Income before income taxes	$	60	$	23	$	83	$	(38)	$	23	$	(15)	$	98	$	—	$	98

Asset-Intensive Reinsurance

The increase in ~~2019. Interest credited in this segment relates to amounts credited on cash value products which also have a significant mortality component. Income~~income 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 13.4% and 12.8%~~ for the second quarter and 13.1% and 12.9% for the six months ended June 30, 2020 and 2019, 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 decreased $8 million, or 21.6%, and $7 million, or 10%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decrease in the second quarter and first six months was primarily due to lower salaries and fringe costs related to of incentive-based compensation accruals. Other operating expenses, as a percentage of net premiums were 2.0% and 2.6% for the second quarter and 2.2% and 2.5% first six months of 2020 and 2019, 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 was primarily ~~involves assuming~~due to higher investment ~~risk within underlying annuities~~related gains (losses), net in coinsurance portfolios and ~~corporate-owned life insurance policies. Most~~the increase in fair value of ~~these agreements are coinsurance, coinsurance with~~ the embedded derivatives related to modco/funds withheld ~~or modco.~~ treaties.

The ~~Company recognizes profits or losses~~invested asset base supporting this segment decreased to $23.2 billion as of March 31, 2021, from $23.9 billion as of March 31, 2020.

•The decrease in the asset base was primarily ~~from~~due to the ~~spread between~~run off of existing inforce blocks and fewer blocks reinsured..

•As of March 31, 2021 and 2020, $3.2 billion and $3.4 billion, respectively, of the ~~investment income earned and 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.~~one client.

Impact of certain ~~derivatives:~~derivatives

Income from the asset-intensive business tends to be volatile due to changes in the fair value of certain derivatives, including embedded derivatives associated with reinsurance treaties structured on a modco or funds withheld basis, as well as embedded derivatives associated with the Company’s reinsurance of ~~equity-indexed annuities~~EIAs and variable annuities with guaranteed minimum benefit riders. Fluctuations occur period to period primarily due to changing investment conditions including, but not limited to, interest rate movements (including risk-free rates and credit spreads), implied volatility, the Company’s own credit risk and equity market performance, all of which are factors in the calculations of fair value. Therefore, management believes it is helpful to distinguish between the effects of changes in these derivatives, net of related hedging activity, and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income (included in other revenues), and interest credited. These fluctuations are considered unrealized by management and do not affect current cash flows, crediting rates or spread performance on the underlying treaties.

The following table summarizes the asset-intensive results and quantifies the impact of these embedded derivatives for the periods presented. Revenues before certain derivatives, benefits and expenses before certain derivatives, and income before income taxes and certain derivatives should not be viewed as substitutes for GAAP revenues, GAAP benefits and expenses, and GAAP income before income taxes.

5445

Table of Contents


(dollars in millions)	Three months ended June 30,						Six months ended June 30,						(dollars in millions)	Three months ended March 31,
	2020			2019			2020			2019					2021		2020
Revenues:													Revenues:
Total revenues	$	295		$	280		$	408		$	508		Total revenues		$	290	$	113
Less:													Less:
Embedded derivatives – modco/funds withheld treaties	(7		)	9			(230		)	14			Embedded derivatives – modco/funds withheld treaties		44		(222)
Guaranteed minimum benefit riders and related free standing derivatives	39			4			113			1			Guaranteed minimum benefit riders and related free standing derivatives		(64)		74
Revenues before certain derivatives	263			267			525			493			Revenues before certain derivatives		310		261
Benefits and expenses:													Benefits and expenses:
Total benefits and expenses	202			208			353			371			Total benefits and expenses		230		151
Less:													Less:
Embedded derivatives – modco/funds withheld treaties	(2		)	6			(115		)	8			Embedded derivatives – modco/funds withheld treaties		17		(113)
Guaranteed minimum benefit riders and related free standing derivatives	2			1			40			(1		)	Guaranteed minimum benefit riders and related free standing derivatives		(29)		38
Equity-indexed annuities	5			9			9			10			Equity-indexed annuities		(14)		4
Benefits and expenses before certain derivatives	197			192			419			354			Benefits and expenses before certain derivatives		256		222
Income before income taxes:													Income before income taxes:
Income before income taxes	93			72			55			137
Income (loss) before income taxes													Income (loss) before income taxes		60		(38)
Less:													Less:
Embedded derivatives – modco/funds withheld treaties	(5		)	3			(115		)	6			Embedded derivatives – modco/funds withheld treaties		27		(109)
Guaranteed minimum benefit riders and related free standing derivatives	37			3			73			2			Guaranteed minimum benefit riders and related free standing derivatives		(35)		36
Equity-indexed annuities	(5		)	(9		)	(9		)	(10		)	Equity-indexed annuities		14		(4)
Income before income taxes and certain derivatives	$	66		$	75		$	106		$	139		Income before income taxes and certain derivatives		$	54	$	39

Embedded Derivatives – Modco/Funds Withheld Treaties – Represents the change in the fair value of embedded derivatives on funds withheld at interest associated with treaties written on a modco or funds withheld basis. The fair value changes of these embedded derivatives ~~on funds withheld at interest associated with treaties written on a modco or funds withheld basis~~ are reflected in revenues, while the related impact on deferred acquisition expenses is reflected in benefits and expenses. The Company’s utilization of a credit valuation adjustment did not have a material effect on the change in fair value of these embedded derivatives for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~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 ~~$(5)~~$27 million and $3$(109) million for the ~~second quarter and $(115) million and $6 million for the six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The ~~decrease~~increase in income for the ~~second quarter~~three months ended March 31, 2021, was primarily due to ~~updated client reporting, partially offset by~~ tightening ~~credit spread. The decrease in income for the first six months of 2020 was primarily due to widening~~ credit spreads, partially offset by ~~lower~~higher risk free interest ~~rates, both of which were primarily attributable to the recent disruption in the global financial markets caused by the COVID-19 pandemic.~~rates.

Guaranteed Minimum Benefit Riders – Represents the impact related to guaranteed minimum benefits associated with the Company’s reinsurance of variable annuities. The fair value changes of the guaranteed minimum benefits along with the changes in fair value of the free standing derivatives (interest rate swaps, financial futures and equity options), purchased by the Company to substantially hedge the liability are reflected in revenues, while the related impact on deferred acquisition expenses is reflected in benefits and expenses. The change in fair value of the embedded derivatives on guaranteed minimum benefits are net of an increase (decrease) in investment related gains (losses), net of $(55) million and $99 million for the three months ended March 31, 2021 and 2020, respectively, associated with the Company’s utilization of a credit valuation ~~adjustment did not have a material effect on the change in fair value of these embedded derivatives for the six months ended June 30, 2020 and 2019.~~adjustment.

The change in fair value of the guaranteed minimum benefits, after allowing for changes in the associated free standing derivatives, increased (decreased) income before income taxes by ~~$37~~$(35) million and $3$36 million for the ~~second quarter and $73 million and $2 million for the six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The ~~increase~~decrease in income for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, was primarily due to a reduction in the ~~change in~~ credit valuation adjustment which ~~was primarily attributable to~~has the ~~recent disruption in~~impact of increasing the ~~global financial markets caused by~~fair value of the ~~COVID-19 pandemic.~~guaranteed minimum benefit liability.

Equity-Indexed Annuities – Represents changes in the liability for equity-indexed annuities in excess of changes in account value, after adjustments for related deferred acquisition expenses. The change in fair value of embedded derivative liabilities associated with equity-indexed annuities ~~decreased~~increased (decreased) income before income taxes by $5$14 million and $9by $(4) million for the ~~second quarter and $9 million and $10 million for the six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The ~~decreases~~increase in income for the ~~second quarter and first six~~three months ~~of 2020 were primarily~~ended March 31, 2021, was due to ~~declining~~an increase in risk free interest ~~rates.~~rates which has the impact of lowering the fair value of the liability.

5546

Table of Contents

The changes in derivatives discussed above are considered unrealized by management and do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Fluctuations occur period to period primarily due to changing investment conditions including, but not limited to, interest rate movements (including benchmark rates and credit spreads), credit valuation adjustments, implied volatility and equity market performance, all of which are factors in the calculations of fair value. Therefore, management believes it is helpful to distinguish between the effects of changes in these derivatives and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income (included in other revenues) and interest credited.

Discussion and analysis before certain ~~derivatives:~~derivatives

•Income before income taxes and certain derivatives ~~decreased~~increased by ~~$9 million and $33~~$15 million for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019.~~2020. The ~~decrease for the three months ended June 30, 2020, was primarily due to favorable investment spreads in the prior year. The decrease for the six months ended June 30. 2020~~increase was primarily due to the impact from ~~negative~~improved equity market performance ~~favorable investment spreads in the prior year,~~ and ~~lower~~higher investment related gains (losses), net in coinsurance and funds withheld portfolios. ~~Funds withheld capital gains (losses) are reported in investment income.~~

•Revenue before certain derivatives ~~decreased by $5 million and~~ increased by ~~$32~~$49 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019.~~2020. The ~~decrease~~increase in the ~~second~~first quarter of 2021 was primarily due to ~~lower~~the increases in fair value of equity options associated with the reinsurance of EIAs and higher investment related gains (losses), net ~~due~~in coinsurance portfolios. The effect on investment income related to ~~increased allowances for commercial mortgage loans, partially~~equity options is substantially offset by ~~asset-intensive transactions executed~~a corresponding change in the second half of 2019. The increase in the first six months of 2020 was primarily due to asset-intensive transactions executed in the second half of 2019, partially offset by lower investment related gains (losses), net due to increased allowances for commercial mortgage loans.interest credited.

•Benefits and expenses before certain derivatives increased by ~~$5 million and $65~~$34 million for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, as compared to the same period in ~~2019.~~2020. The ~~increases~~increase in the ~~second~~current quarter ~~and first six months were~~was primarily due to ~~asset-intensive transactions executed in 2019.~~

The invested asset base supporting this segment increased to $23.5 billion as of June 30, 2020 from $22.1 billion as of June 30, 2019. As of June 30, 2020, $3.1 billion of the invested assets were funds withheld athigher interest ~~of which greater than 90% is~~credited associated with ~~one client.~~

~~Financial Solutions~~ – ~~Capital Solutions~~the reinsurance of EIAs due to improved equity market performance. The effect on interest credited related to equity options is substantially offset by a corresponding increase in investment income.

Capital Solutions ~~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 $4 million, or 20.0%, and $9 million, or 23.7%,~~ for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021, was consistent with the three months ended March 31, 2020,, as ~~compared to the same periods in 2019. The increases were primarily due to~~ the growth from new transactions ~~and organic growth on existing transactions.~~

~~At June 30, 2020 and 2019, the amount of reinsurance assumed from client companies, as measured~~was offset by pre-tax statutory surplus, risk based capital and other financial structures was $19.4 billion and $15.8 billion, respectively. The increase was primarily due to a number of new transactions offsetting the termination of certain ~~agreements, as well as organic growth on existing~~ transactions. Fees earned from this business can vary significantly depending on the size of the transactions and the timing of their completion and therefore can fluctuate from period to period.

•As of March 31, 2021 and 2020, the amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial structures was $22.0 billion and $18.1 billion, respectively.

Table of Contents

Canada Operations

The Company conducts reinsurance business in Canada primarily through RGA ~~Canada.~~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, 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.


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	303	$	281	$	22
Investment income, net of related expenses	60		50		10
Investment related gains (losses), net	2		(12)		14
Other revenues	4		1		3
Total revenues	369		320		49
Benefits and expenses:
Claims and other policy benefits	284		240		44
Interest credited	—		—		—
Policy acquisition costs and other insurance expenses	45		45		—
Other operating expenses	10		9		1
Total benefits and expenses	339		294		45
Income (loss) before income taxes	$	30	$	26	$	4

(dollars in millions) Three months ended June 30,
2020 2019
Revenues: Traditional Financial Solutions Total Canada Traditional Financial Solutions Total Canada
Net premiums $ 254
$ 20
$ 274
$ 264
$ 23
$ 287
Investment income, net of related expenses 50
—
50
51
—
51
Investment related gains (losses), net 6
—
6
3
—
3
Other revenues 1
2
3
—
1
1
Total revenues 311
22
333
318
24
342
Benefits and expenses:
Claims and other policy benefits 216
17
233
206
20
226
Interest credited —
—
—
—
—
—
Policy acquisition costs and other insurance expenses 42
1
43
57
1
58
Other operating expenses 9
—
9
9
(1 ) 8
Total benefits and expenses 267
18
285
272
20
292
Income before income taxes $ 44
$ 4
$ 48
$ 46
$ 4
$ 50

(dollars in millions) Six months ended June 30,
2020 2019
Revenues: Traditional Financial Solutions Total Canada Traditional Financial Solutions Total Canada
Net premiums $ 514
$ 41
$ 555
$ 519
$ 45
$ 564
Investment income, net of related expenses 99
1
100
100
1
101
Investment related gains (losses), net (6 ) —
(6 ) 10
—
10
Other revenues —
4
4
1
2
3
Total revenues 607
46
653
630
48
678
Benefits and expenses:
Claims and other policy benefits 436
37
473
406
41
447
Interest credited —
—
—
—
—
—
Policy acquisition costs and other insurance expenses 87
1
88
111
1
112
Other operating expenses 17
1
18
16
1
17
Total benefits and expenses 540
39
579
533
43
576
Income before income taxes $ 67
$ 7
$ 74
$ 97
$ 5
$ 102

~~Income before income taxes decreased by $2 million, or 4.0%, and $28 million, or 27.5%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~ •The ~~decrease~~increase in income before income taxes for the ~~second quarter was primarily due to less favorable individual life mortality experience~~three months ended March 31, 2021, as compared to the same period in ~~2019 partially~~2020 is primarily due to increases in net premiums in the Canada Traditional segment and investment related gains. These increases are mostly offset by ~~higher investment related gains~~increased claims and other policy benefits associated with the ~~changes~~COVID-19 pandemic.

•While foreign currency fluctuations can result in variances in the ~~fair value of credit default swap derivatives. Foreign currency exchange fluctuations~~financial statement line items, fluctuation in the Canadian dollar ~~resulted~~did not result in a ~~decrease in income before income taxes of $2 million and $1 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~

~~Table of Contents~~

~~Traditional Reinsurance~~

~~Income before income taxes for the Canada Traditional segment decreased by $2 million, or 4.3%, and $30 million, or 30.9%, for the~~ ~~three and six~~ ~~months ended~~ ~~June 30, 2020, as compared to the same periods in 2019. The decrease~~material change in income before income taxes for the second quarter was primarily due to less favorable individual life mortality experience compared to the same period in 2019 partially offset by higher investment related gains associated with the changes in the fair valuethree months ended March 31, 2021. Unless otherwise stated, all amounts discussed below are net of ~~credit default swap derivatives.~~ foreign currency fluctuations.

Traditional Reinsurance


For the three months ended March 31,
(dollars in millions)	2021			2020			2021 vs 2020
Revenues:
Net premiums	$	280		$	260		$	20
Investment income, net of related expenses	60			49			11
Investment related gains (losses), net	2			(12)			14
Other revenues	1			(1)			2
Total revenues	343			296			47
Benefits and expenses:
Claims and other policy benefits	266			220			46
Interest credited	—			—			—
Policy acquisition costs and other insurance expenses	45			45			—
Other operating expenses	8			8			—
Total benefits and expenses	319			273			46
Income (loss) before income taxes	$	24		$	23		$	1
Key metrics:
Life insurance in force	$460.1 billion			$389.5 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	95.0		%	84.6		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	16.1		%	17.3		%
Other operating expenses as a percentage of net premiums	2.9		%	3.1		%

The decrease in income for the first six months of 2020 was primarily due to less favorable individual life mortality experience compared to the same period in 2019 and investment related losses due to changes in the fair value of credit default swap derivatives. See “The COVID-19 Impact and Update” above for more information regarding the impact of COVID-19. Foreign currency exchange fluctuations in the Canadian dollar resulted in a decreaseincrease in income before income taxes ~~of $1 million and $1 million~~ for the three ~~and six~~ months ended ~~June 30, 2020, as compared~~March 31, 2021, is primarily due to ~~the same periods in 2019.~~

~~Net premiums decreased by $10 million, or 3.8%, and $5 million, or 1.0%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decreases~~increases in net premiums ~~in 2020 were primarily due to foreign currency losses~~ and ~~an anticipated reduction in the base of the offshore creditors business,~~investment related gains (losses), net, offset by an increase in the inforce business as well as new inforce block transaction effective January 1, 2020. Foreign currency exchange fluctuations in the Canadian dollar resulted in a decrease in net premiums of $9 million and $12 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

Net investment income decreased $1 million, or 2.0%, and $1 million, or 1.0%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. Foreign currency exchange fluctuation in the Canadian dollar resulted in a decrease in net investment income of $2 million and $2 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

Other revenues increased by $1 million and decreased by $1 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019. These variances were primarily due to gains and losses related to foreign currency transactions.

Loss ratios for this segment were 85.0% and 78.1% for the second quarter and 84.8% and 78.2% for the six months ended June 30, 2020 and 2019, respectively. The increases in the loss ratios were due to less favorable individual life mortality experience as compared to 2020.

Revenues

Table of Contents

•The segment added new life business production, measured by face amount of insurance in force, of $14.2 billion, and $12.2 billion during the ~~same periods~~first three months of 2021 and 2020, respectively.

•The increase in ~~2019. Approximately $8 million~~net investment income was primarily due to increased variable investment income and an increase in the invested asset base due to growth in the underlying business volume partially offset by a decline in interest rates. The change in investment related gains (losses) is primarily attributable to an increase in the fair value of ~~claims~~credit default derivatives due to the tightening of credit spreads.

Benefits and expenses

•The increase in the loss ratio for the three months ended ~~June 30, 2020, were identified as COVID-19 related and contributed to the higher loss ratios in 2020.~~

Policy acquisition costs and other insurance expenses as a percentage of net premiums were 16.5% and 21.6% for the second quarter and 16.9% and 21.4% for the six months ended June 30, 2020 and 2019, 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 decreases in the policy acquisition and other insurance expenses as percentage of net premiums was the result of a reduction in creditor business which has higher commission than other businesses. 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 were unchanged and increased $1 million, or 6.3%, for the three and six months ended June 30, 2020, respectively, as compared to the same periods in 2019. Other operating expenses as a percentage of net premiums were 3.5% and 3.2% for the second quarter and 3.3% and 3.2% for the six month periods ended June 30, 2020 and 2019, respectively.

~~Financial Solutions Reinsurance~~

~~Income before income taxes was unchanged for the three month period ended June 30, 2020,~~March 31, 2021, as compared to the same period in ~~2019 and increased by $2~~2020, was primarily due to unfavorable claims experience in the individual mortality line of business, attributed primarily to the COVID-19 pandemic. While the cause of death is not yet available for all claims, the Company estimates that approximately $26 million ~~or 40.0%,~~of excess claims for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, were attributable to COVID-19 or COVID-19 related factors.

Financial Solutions Reinsurance


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	23	$	21	$	2
Investment income, net of related expenses	—		1		(1)
Investment related gains (losses), net	—		—		—
Other revenues	3		2		1
Total revenues	26		24		2
Benefits and expenses:
Claims and other policy benefits	18		20		(2)
Interest credited	—		—		—
Policy acquisition costs and other insurance expenses	—		—		—
Other operating expenses	2		1		1
Total benefits and expenses	20		21		(1)
Income (loss) before income taxes	$	6	$	3	$	3

The increase in income before income taxes was primarily a result of favorable mortality experience on longevity business for the three months ended March 31, 2021, as compared to the same ~~periods~~period in ~~2019. The increase in income for the first six months was primarily due to a new transaction completed at the end of 2019.~~

Net premiums decreased $3 million, or 13.0%, and $4 million, or 8.9%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decreases were primarily due to decreases of in force longevity premiums and foreign currency impacts. Foreign currency exchange fluctuations in the Canadian dollar resulted in a decrease in net premiums of $1 million and $1 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

~~Net investment income for the three and six months ended June 30, 2020, was consistent with the comparable periods in 2019.~~

~~Claims and other policy benefits decreased $3 million, or 15.0%, and $4 million, or 9.8%, for the three and six months ended~~ ~~June 30, 2020~~, as compared to the same periods in 2019. The decreases for the second quarter and first six months were primarily a result of more favorable claims experience in the longevity block of business compared to the same period last year.2020.

Europe, Middle East and Africa Operations

The Europe, Middle East and Africa (“EMEA”) operations include business primarily generated by ~~its~~ offices ~~principally~~ in France, Germany, Ireland, Italy, the Middle East, the Netherlands, Poland, South Africa, Spain and the United Kingdom (“UK”). EMEA consists of

~~Table of Contents~~

two major segments: Traditional and Financial Solutions. The Traditional segment primarily provides reinsurance through yearly renewable term and coinsurance agreements on a variety of life, health and critical illness products. Reinsurance agreements may be facultative or automatic agreements covering primarily individual risks and, in some markets, group risks. The Financial Solutions segment consists of reinsurance and other transactions associated with longevity closed blocks, payout annuities, capital management solutions and financial reinsurance.


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	517	$	443	$	74
Investment income, net of related expenses	68		47		21
Investment related gains (losses), net	16		(6)		22
Other revenues	2		1		1
Total revenues	603		485		118
Benefits and expenses:
Claims and other policy benefits	544		387		157
Interest credited	(1)		(17)		16
Policy acquisition costs and other insurance expenses	31		31		—
Other operating expenses	37		37		—
Total benefits and expenses	611		438		173
Income (loss) before income taxes	$	(8)	$	47	$	(55)

Table of Contents

(dollars in millions) Three months ended June 30,
2020 2019
Revenues: Traditional Financial Solutions Total EMEA Traditional Financial Solutions Total EMEA
Net premiums $ 352
$ 57
$ 409
$ 351
$ 57
$ 408
Investment income, net of related expenses 18
61
79
18
47
65
Investment related gains (losses), net —
16
16
—
3
3
Other revenues 1
2
3
1
7
8
Total revenues 371
136
507
370
114
484
Benefits and expenses:
Claims and other policy benefits 301
13
314
296
47
343
Interest credited —
16
16
—
3
3
Policy acquisition costs and other insurance expenses 32
1
33
28
1
29
Other operating expenses 22
8
30
30
11
41
Total benefits and expenses 355
38
393
354
62
416
Income before income taxes $ 16
$ 98
$ 114
$ 16
$ 52
$ 68

(dollars in millions) Six months ended June 30,
2020 2019
Revenues: Traditional Financial Solutions Total EMEA Traditional Financial Solutions Total EMEA
Net premiums $ 742
$ 110
$ 852
$ 715
$ 109
$ 824
Investment income, net of related expenses 37
89
126
37
95
132
Investment related gains (losses), net —
10
10
—
6
6
Other revenues (1 ) 5
4
2
13
15
Total revenues 778
214
992
754
223
977
Benefits and expenses:
Claims and other policy benefits 635
66
701
608
96
704
Interest credited —
(1 ) (1 ) —
15
15
Policy acquisition costs and other insurance expenses 62
2
64
57
2
59
Other operating expenses 48
19
67
57
20
77
Total benefits and expenses 745
86
831
722
133
855
Income before income taxes $ 33
$ 128
$ 161
$ 32
$ 90
$ 122

~~Income before income taxes increased by $46 million, or 67.6%, and $39 million, or 32.0%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~ •The ~~increases in income before income taxes were primarily due to favorable performance on closed block longevity business. Foreign currency exchange fluctuations resulted in a~~ decrease in income before income taxes ~~of $4 million and $4 million~~ for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019.~~

~~Traditional Reinsurance~~2020 was primarily due to unfavorable mortality experience due to the COVID-19 pandemic partially offset by an increase in net premiums, investment income and investment related gains.

~~Income~~•While foreign currency fluctuations can result in variances in the financial statement line items, fluctuations in foreign currency did not have a material impact on income before income taxes for the three ~~and six~~ months ended ~~June 30, 2020, was consistent with the comparable periods in~~ ~~2019. Poor mortality experience, primarily due to the impact~~March 31, 2021. Unless otherwise stated, all amounts discussed below are net of COVID-19, was offset by an improvement in morbidity experience and a decrease in general expenses. The increase in income for the first six months was primarily due to an improvement in mortality experience and lower general expenses partly offset by a worsening of morbidity experience. See ~~“The COVID-19 Impact and Update” above for more information regarding the impact of COVID-19.~~ ~~Foreign~~foreign currency ~~exchange fluctuations resulted in a~~fluctuations.

Traditional Reinsurance


For the three months ended March 31,
(dollars in millions)	2021			2020			2021 vs 2020
Revenues:
Net premiums	$	438		$	390		$	48
Investment income, net of related expenses	20			19			1
Investment related gains (losses), net	—			—			—
Other revenues	(1)			(2)			1
Total revenues	457			407			50
Benefits and expenses:
Claims and other policy benefits	469			334			135
Interest credited	—			—			—
Policy acquisition costs and other insurance expenses	29			30			(1)
Other operating expenses	27			26			1
Total benefits and expenses	525			390			135
Income (loss) before income taxes	$	(68)		$	17		$	(85)
Key metrics:
Life insurance in force	$830.8 billion			$763.1 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	107.1		%	85.6		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	6.6		%	7.7		%
Other operating expenses as a percentage of net premiums	6.2		%	6.7		%

The decrease in income before income taxes ~~of $1 million and $1 million~~ for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, as compared to the same ~~periods~~period in ~~2019.~~2020 is primarily due to unfavorable mortality experience, partially offset by an increase in net premiums.

Revenues

~~Table of Contents~~•

~~Net premiums increased $1 million, or 0.3%, and $27 million, or 3.8%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~ The increase in net premiums ~~for the three and six months were primarily~~was due to an in increase in business volume on new and existing treaties. ~~Foreign currency exchange fluctuations decreased net premiums~~

•The segment added new life business production, measured by ~~$20 million~~face amount of insurance in force, of $27.6 billion, and ~~$33 million for~~$32.9 billion during the three ~~and six~~ months ended ~~June 30, 2020, as compared to~~March 31, 2021, and the same ~~periods~~period in ~~2019.~~2020, respectively.

~~A portion of the net premiums for the segment, in each period presented, relates to reinsurance of critical illness coverage (morbidity risk), primarily~~Benefits and expenses

•The increase 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 $40 million and $43 million for the second quarter and $82 million and $88 millionloss ratio for the first ~~six~~three months of ~~2020 and 2019, respectively.~~

~~Net investment income was consistent for the~~ ~~three and six~~ ~~months ended~~ ~~June 30, 2020~~, as compared to the same periods in 2019, with an increase in the invested asset base from business growth offset by a decrease in investment yields. Foreign currency exchange fluctuations resulted in a decrease in net investment income of $1 million and $2 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

~~Loss ratios for this segment were 85.5% and 84.3% for the second quarter and 85.6% and 85.0% for the first six months ended~~ ~~June 30, 2020~~ ~~and 2019, respectively. The increases in loss ratios were~~2021 is due to ~~normal claims variability and the impact of approximately $19 million of COVID-19 related claims reported during the second quarter of 2020.~~

Policy acquisition costs and other insurance expenses as a percentage of net premiums were 9.1% and 7.9% for the second quarter and 8.4% and 8.1% for the first six months ended June 30, 2020 and 2019, respectively. The increases in the percentages are due primarily to variations in the mixture of business.

Other operating expenses decreased $8 million, or 26.7%, and $9 million, or 15.8%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The current periods have benefited from reduced incentive-based compensation and travel expensesunfavorable mortality experience primarily attributable to COVID-19. ~~Foreign currency fluctuations resulted in a decrease in operating expenses~~While the cause of $2death is not available for all claims, the Company estimates that approximately $98 million of excess claims for the three ~~and six~~ months ended ~~June 30, 2020, as compared~~March 31, 2021, were attributable to ~~the same periods in 2019. Other operating expenses as a percentage~~COVID-19 or COVID-19 related factors.

Financial Solutions


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	79	$	53	$	26
Investment income, net of related expenses	48		28		20
Investment related gains (losses), net	16		(6)		22
Other revenues	3		3		—
Total revenues	146		78		68
Benefits and expenses:
Claims and other policy benefits	75		53		22
Interest credited	(1)		(17)		16
Policy acquisition costs and other insurance expenses	2		1		1
Other operating expenses	10		11		(1)
Total benefits and expenses	86		48		38
Income (loss) before income taxes	$	60	$	30	$	30

Table of ~~net premiums totaled 6.3% and 8.6% for the second quarter and 6.5% and 7.9% for the first six months ended~~ ~~June 30, 2020~~ ~~and 2019, respectively.~~Contents

~~Financial Solutions~~ ~~Reinsurance~~

~~Income before income taxes increased by $46 million, or 88.5%, and $38 million, or 42.2%, for the~~ ~~three and six~~ ~~months ended~~ ~~June 30, 2020, as compared to the same periods in~~ ~~2019~~. The ~~increases were primarily due to favorable termination experience on closed longevity blocks. Foreign currency exchange fluctuations resulted in a decrease~~increase in income before income taxes ~~of $3 million and $3 million~~ for the first three months was primarily due to new business activity and ~~six months ended June 30, 2020, as compared to~~investment related gains on the ~~same periods in 2019.~~investments supporting the segment’s payout annuity business.

Revenues

~~Net premiums were flat and increased by $1 million, or 0.9%, for the~~ •~~three and six~~ ~~months ended~~ ~~June 30, 2020, as compared to the same periods in 2019.~~ The increase in net premiums was primarily due to ~~higher new business~~increased volumes of closed longevity block business. ~~Foreign currency exchange fluctuations decreased net premiums by $2 million and $3 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~

~~Net investment income increased by $14 million, or 29.8%, and decreased by $6 million, or 6.3%, for the~~ •~~three and six~~ ~~months ended~~ ~~June 30, 2020, as compared to the same periods in 2019.~~ The increase in net investment income ~~for the three months~~ was primarily ~~due~~related to an increased invested asset base resulting from business growth and an increase in investment income associated with unit-linked policies which fluctuate with market performance. The decrease in investment income for the six months was primarily due to a decrease in investmenthigher income associated with unit-linked policies which fluctuate with market performance ~~partly~~and is offset by an increase in ~~the invested asset base from business growth. The effect on investment income related to unit-linked products is substantially offset by a corresponding change in~~ interest credited. ~~Foreign currency exchange fluctuations resulted in a decrease~~

•The increase in net investment ~~income of $2 million and $2 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~

~~Investment~~ related gains ~~(losses) net, increased by $13 million and $4 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The increases were~~was primarily due to increases in the fair market value of derivative hedging instruments. Foreign currency exchange fluctuations resulted in a decrease in investment related gains (losses) of $1 million for the three months ended June 30, 2020, as compared to the same period in 2019.derivatives.

Benefits and expenses

~~Other revenues decreased by $5 million, or 71.4%, and $8 million, or 61.5%, for the~~ •~~three and six~~ ~~months ended~~ ~~June 30, 2020, as compared to the same periods in 2019.~~ The decreases relate to a one-time fees received related to a new payout annuity transaction completed in the second quarter of 2019 and fees on a treaty that terminated in the fourth quarter of 2019. Foreign currency exchange fluctuations resulted in a decrease in other revenues of $1 million for the six months ended June 30, 2020, as compared to the same period in 2019.

~~Table of Contents~~

~~Claims and other policy benefits decreased $34 million, or 72.3%, and $30 million, or 31.3%, for the three and six months ended~~ ~~June 30, 2020~~, as compared to the same periods in 2019. The decrease in the second quarter and the first six months was primarily due to favorable termination experience on closed block longevity business. Foreign currency exchange fluctuations resulted in a decreaseincrease in claims and other policy benefits is the result of ~~$1 million~~increased volumes of closed longevity block business and ~~$2 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~some unfavorable experience from payout annuity business.

~~Interest credited expense increased by $13 million~~•The increase in benefits and ~~decreased by $16 million or the three and six months ended June 30, 2020, as compared~~expenses is also related to ~~the same periods~~an increase in ~~2019.~~interest credited. Interest credited in this segment relates to amounts credited to the ~~contractholders~~contract holders of unit-linked products. This amount will fluctuate according to 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 decreased $3 million, or 27.3%, and $1 million, or 5.0%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The current periods have benefited from reduced incentive-based compensation and travel expenses primarily attributable to COVID-19. Foreign currency exchange fluctuations resulted in a decrease in operating expenses of $1 million for the six months ended June 30, 2020, as compared to the same period in 2019.

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, ~~and~~ asset-intensive ~~transactions including~~and certain disability and life ~~and health blocks with significant investment risk. Reinsurance agreements may be facultative or automatic agreements covering primarily individual risks and~~blocks.


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	662	$	710	$	(48)
Investment income, net of related expenses	61		44		17
Investment related gains (losses), net	11		(33)		44
Other revenues	17		14		3
Total revenues	751		735		16
Benefits and expenses:
Claims and other policy benefits	564		617		(53)
Interest credited	15		13		2
Policy acquisition costs and other insurance expenses	54		63		(9)
Other operating expenses	49		43		6
Total benefits and expenses	682		736		(54)
Income (loss) before income taxes	$	69	$	(1)	$	70

•The increase in ~~some markets, group risks.~~

(dollars in millions) Three months ended June 30,
2020 2019
Revenues: Traditional Financial Solutions Total Asia Pacific Traditional Financial Solutions Total Asia Pacific
Net premiums $ 607
$ 31
$ 638
$ 606
$ 44
$ 650
Investment income, net of related expenses 27
21
48
24
11
35
Investment related gains (losses), net —
15
15
—
(1 ) (1 )
Other revenues 2
8
10
4
5
9
Total revenues 636
75
711
634
59
693
Benefits and expenses:
Claims and other policy benefits 514
32
546
568
37
605
Interest credited —
11
11
—
6
6
Policy acquisition costs and other insurance expenses 34
5
39
(12 ) 10
(2 )
Other operating expenses 41
1
42
44
4
48
Total benefits and expenses 589
49
638
600
57
657
Income (loss) before income taxes $ 47
$ 26
$ 73
$ 34
$ 2
$ 36

~~Table of Contents~~

(dollars in millions) Six months ended June 30,
2020 2019
Revenues: Traditional Financial Solutions Total Asia Pacific Traditional Financial Solutions Total Asia Pacific
Net premiums $ 1,243
$ 105
$ 1,348
$ 1,253
$ 78
$ 1,331
Investment income, net of related expenses 54
38
92
50
21
71
Investment related gains (losses), net —
(18 ) (18 ) —
3
3
Other revenues 6
18
24
4
12
16
Total revenues 1,303
143
1,446
1,307
114
1,421
Benefits and expenses:
Claims and other policy benefits 1,069
94
1,163
1,114
69
1,183
Interest credited —
24
24
—
13
13
Policy acquisition costs and other insurance expenses 83
19
102
39
15
54
Other operating expenses 80
5
85
83
9
92
Total benefits and expenses 1,232
142
1,374
1,236
106
1,342
Income before income taxes $ 71
$ 1
$ 72
$ 71
$ 8
$ 79

~~Income~~income before ~~income~~ taxes ~~increased by $37 million, or 102.8%, and decreased by $7 million, or 8.9%, for the three and six months ended June 30, 2020,~~ as compared to the same ~~periods~~period in ~~2019.~~ 2020 was the result of favorable claims experience across the segment as compared to the prior year, as well as income from new business growth within the Financial Solutions business.

•Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in a $2 million increase in income before income taxes during the three months ended March 31, 2021. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Table of Contents

Traditional Reinsurance


For the three months ended March 31,
(dollars in millions)	2021			2020			2021 vs 2020
Revenues:
Net premiums	$	609		$	636		$	(27)
Investment income, net of related expenses	33			27			6
Investment related gains (losses), net	(1)			—			(1)
Other revenues	6			4			2
Total revenues	647			667			(20)
Benefits and expenses:
Claims and other policy benefits	518			555			(37)
Interest credited	—			—			—
Policy acquisition costs and other insurance expenses	43			49			(6)
Other operating expenses	45			39			6
Total benefits and expenses	606			643			(37)
Income (loss) before income taxes	$	41		$	24		$	17
Key metrics:
Life insurance in force	$521.0 billion			$635.6 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	85.1		%	87.3		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	7.1		%	7.7		%
Other operating expenses as a percentage of net premiums	7.4		%	6.1		%

The increase in income before income taxes for the three months ended June 30, 2020, was primarily due to continued growth of Financial Solutions Reinsurance in Asia, increases in the market value of derivatives and more favorable experience, mainly in Australia across most product lines. The decrease in income before income taxes for the first six months is primarily attributable to declines in the fair value of derivatives hedging inflation risk, foreign exchange and credit risk, and unfavorable claims experience in Asia in the first three months, partially offset by more favorable experience in Australia. Foreign currency exchange fluctuations resulted in an increase in income before income taxes of $1 million and $2 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

~~Traditional Reinsurance~~

Income before income taxes increased by $13 million, or 38.2%, and for the three months ended June 30, 2020 as compared to the same period in 2019 and was consistent for the six months ended June 30, 2020, as compared to the same period in 2019. The increase in income before income taxes for the three months ended June 30, 2020, was the result of net favorable claims experience across the segment, mainly in Australia across most product lines, as compared to the same period in 2019. Income before income taxes for the six months ended June 30, 2020, was flat as compared to the same period in 2019 due to unfavorable claims experience in Asia in the first three months of 2020,partially offset by ~~favorable experience~~a decrease in ~~Australia for the year across most product lines. Foreign currency exchange fluctuations resulted~~net premiums.

Revenues

•The decrease in ~~an increase in income before income taxes of $2 million and $1 million for the three and six months ended June 30, 2020, as compared~~net premiums was primarily due to ~~the same periods in 2019.~~

Net premiums increased by $1 million, or 0.2%, and decreased by $10 million, or 0.8%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. Premiums for the six months ended June 30, 2020, are reflective of 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 ~~legislation effective July 2019~~life business production, measured by face amount of insurance in force, of $7.6 billion, and ~~April~~$15.7 billion during the three months ended March 31, 2021 and 2020, ~~as well as unfavorable foreign currency exchange fluctuations, partially~~respectively, due to new business production and in force transactions offset by ~~new business growth~~lapses, recaptures and non-renewal of two large group treaties in ~~Asia. Foreign currency exchange fluctuations resulted in a decrease in net premiums of $12 million~~Australia.

Benefits and ~~$28 million for the three and six months of 2020, as compared to the same periods in 2019.~~expenses

Net premiums earned from the reinsurance of critical illness (morbidity risk) in the segment, which is offered primarily in South Korea, Australia, China and Hong Kong, totaled $246 million and $243 million for the second quarter and $502 million and $495 million for the first six months ended June 30, 2020 and 2019, respectively. Critical illness coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness.

Net investment income increased by $3 million, or 12.5%, and $4 million, or 8.0%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The increases were due to an increase in the invested asset base, partially offset by a lower investment yield and foreign currency exchange fluctuations. Foreign currency exchange fluctuations resulted in a decrease in net investment income of $1 million and $2 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

Other revenues decreased by $2 million, or 50.0%, and increased by $2 million, or 50.0%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. Fluctuations in other revenues are driven by foreign currency gains and losses in each period. Foreign currency exchange fluctuations had a negligible effect in other revenues for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

~~Table of Contents~~•

~~Loss ratios for this segment were 84.7% and 93.7% for the second quarter and 86.0% and 88.9% for the six months ended June 30, 2020 and 2019, respectively.~~ The decrease in the loss ratio for the ~~second quarter was primarily due to unfavorable experience adjustments in Asia in the second quarter of 2019 as well as favorable experience in Australia in the current year,~~three months ended March 31, 2021, as compared to the same period in 2019. Based on client reporting received to date, the impact of COVID-19 claims was not material to the segment during the second quarter of 2020. The decrease in the loss ratio for the six months ended June 30, 2020 ~~as compared to the same period in 2019~~ was primarily due to ~~unfavorable experience adjustments in Asia in the second quarter of 2019 as well as~~ favorable ~~experience in Australia in the current year, partially offset by unfavorable~~ claims experience ~~on a large treaty in Asia in~~across the ~~first three months~~segment. While the cause of ~~2020.~~

~~Policy acquisition costs and other insurance expenses as a percentage~~death is not yet available for all claims, the Company estimates that approximately $5 million of net premiums were 5.6% and (1.9%) for the second quarter and 6.7% and 3.1% for the six months ended June 30, 2020 and 2019, respectively. The ratio of policy acquisition costs and other insurance expenses as a percentage of net premiums fluctuates periodically due to timing of client company reporting and variations in the mixture of business.

~~Other operating expenses decreased $3 million, or 6.8%, and $3 million, or 3.6%,~~claims for the three ~~and six~~ months ended ~~June 30, 2020, as compared to the same periods in 2019, with the current periods benefiting from lower travel expenses primarily~~March 31, 2021, were attributable to COVID-19 as well as lower incentive-based compensation expense. Other operating expenses as a percentage of net premiums totaled 6.8% and 7.0% for the second quarter and 6.4% and 6.5% for the first six months ended June 30, 2020 and 2019, 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.or COVID-19 related factors, primarily in India.

Financial Solutions ~~Reinsurance~~


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	53	$	74	$	(21)
Investment income, net of related expenses	28		17		11
Investment related gains (losses), net	12		(33)		45
Other revenues	11		10		1
Total revenues	104		68		36
Benefits and expenses:
Claims and other policy benefits	46		62		(16)
Interest credited	15		13		2
Policy acquisition costs and other insurance expenses	11		14		(3)
Other operating expenses	4		4		—
Total benefits and expenses	76		93		(17)
Income (loss) before income taxes	$	28	$	(25)	$	53

Table of Contents

~~Income before income taxes increased by $24 million and decreased by $7 million for the three and six months ended~~
~~June 30, 2020, as compared to the same periods in~~ ~~2019~~.

The increase in income before income taxes ~~for the second quarter was~~is primarily due to ~~new business growth~~favorable fluctuations in the ~~segment and increases in the market value of derivatives. The decrease in the first six months was primarily due to declines in the market~~fair value of derivatives ~~partially offset by higher income from~~and continued growth and favorable experience on existing asset-intensive business growth in the segment. Foreign currency exchange fluctuations resulted in an increase (decrease) in income before income taxes of $(1) million and $1 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

Net premiums decreased $13 million and increased by $27 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decrease for the second quarter was primarily due to slowed new business. The increase in the first six months of 2020 was attributable to new asset-intensive transactions in Asia. ~~Foreign currency exchange fluctuations increased net premiums by $1 million and $1 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~

Net investment income increased $10 million, or 90.9%, and $17 million, or 81.0%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019 primarily due to an increase in invested asset base, partially offset by a lower investment yield. Foreign currency exchange fluctuations had a negligible impact on net investment income for the three and six months ended June 30, 2020, as compared to the same periods in 2019.

~~Other revenues, which primarily represents fees earned on financial reinsurance transactions, increased by $3 million, or 60.0%, and $6 million, or 50.0%, for the~~ ~~three and six~~ ~~months ended~~ ~~June 30, 2020, as compared to the same periods in 2019. At~~ ~~June 30, 2020~~ ~~and 2019, the~~The amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial reinsurance structures was ~~$3.2~~$1.6 billion and ~~$3.1~~$3.8 billion for the three months ended March 31, 2021 and 2020, respectively. Fees earned from this business can vary significantly depending on the size, complexity and timing of the transactions ~~and the timing of their completion~~ and, therefore, can fluctuate from period to period.

Revenues

~~Claims and other policy benefits decreased by $5 million and increased by $25 million for~~•The decrease in net premiums is attributable to a lower contribution from single premium asset-intensive transactions in the three ~~and six~~ months ended ~~June 30, 2020~~,March 31, 2021, as compared to the same ~~periods~~period in ~~2019.~~ 2020.

•The increase in investment related gains (losses), net is primarily due to favorable fluctuations in the fair value of derivatives due to tightening credit spreads and higher future inflation expectations.

Benefits and expenses

•The decrease in claims and other policy benefits is the ~~second quarter was primarily due to slowed new business. The increase in the first six months~~result of ~~2020 was attributable to new~~a lower reserve impact from single premium asset-intensive transactions in ~~Asia.~~

~~Other operating expenses decreased by $3 million, or 75.0%, and $4 million, or 44.4%, for~~ the three ~~and six~~ months ended ~~June 30, 2020~~,March 31, 2021, as compared to the same ~~periods~~period in 2019, respectively, with the current periods benefiting from lower travel expenses primarily attributable to COVID-19 as well as lower incentive-based compensation expense. The timing of transactions and the level of costs associated with the entrance into and development of new markets and new transactions within the segment may cause other operating expenses to fluctuate over periods of time.2020.

Corporate and Other

Corporate and Other revenues primarily include investment income from unallocated invested assets, investment related gains and losses and service fees. Corporate and Other expenses consist of the offset to capital charges allocated to the operating segments within the policy acquisition costs and other insurance income line item, unallocated overhead and executive costs, interest expense

~~Table of Contents~~

related to debt, and the investment income and expense associated with the Company’s collateral finance and securitization transactions and service business expenses. Additionally, Corporate and Other includes results from certain wholly-owned subsidiaries, such as ~~RGAx,~~RGAX, and joint ventures that, among other activities, develop and market technology, and provide consulting and outsourcing solutions for the insurance and reinsurance industries. ~~In the past two years, the~~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.~~industry and hence generate new future revenue streams.


For the three months ended March 31,
(dollars in millions)	2021		2020		2021 vs 2020
Revenues:
Net premiums	$	—	$	—	$	—
Investment income, net of related expenses	158		58		100
Investment related gains (losses), net	273		(67)		340
Other revenues	10		1		9
Total revenues	441		(8)		449
Benefits and expenses:
Claims and other policy benefits	—		—		—
Interest credited	1		2		(1)
Policy acquisition costs and other insurance income	(28)		(28)		—
Other operating expenses	70		62		8
Interest expense	45		41		4
Collateral finance and securitization expense	3		6		(3)
Total benefits and expenses	91		83		8
Loss before income taxes	$	350	$	(91)	$	441

(dollars in millions) Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Revenues:
Net premiums $ —
$ —
$ —
$ —
Investment income, net of related expenses 48
55
106
98
Investment related gains (losses), net 22
(6 ) (45 ) (7 )
Other revenues 20
13
21
39
Total revenues 90
62
82
130
Benefits and expenses:
Claims and other policy benefits —
—
—
—
Interest credited 3
6
5
11
Policy acquisition costs and other insurance income (29 ) (29 ) (57 ) (58 )
Other operating expenses 69
75
131
146
Interest expense 42
43
83
83
Collateral finance and securitization expense 4
8
10
16
Total benefits and expenses 89
103
172
198
Income (loss) before income taxes $ 1
$ (41 ) $ (90 ) $ (68 )

~~Income (loss) before income taxes increased by $42 million and decreased by $22 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019.~~ The increase in income ~~(loss)~~ before income taxes for the second quarter was primarily due to increases in investment related gains and other revenues, and a decrease in other operating expenses, partially offset by lower investment income. The decrease in income (loss) before income taxes for the first six months wasis primarily due to an increase in ~~investment related losses and a decrease in other revenue, partially offset by increased investment income and lower other operating expenses.~~total revenues.

Net investment income decreased by $7 million, or 12.7%, and increased by $8 million, or 8.2%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decrease in the second quarter was largely attributable to lower yield on unallocated invested assets. Revenues

•The increase in net investment income includes a reclassification of approximately $92 million of pre-tax unrealized gains on certain limited partnerships, for which the ~~first six months was largely~~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 they were reported as earnings by the investees. The remaining increase is attributable to higher investment income on Corporate invested assets due to a higher ~~volume~~asset base and higher yield.

Table of ~~unallocated invested assets.~~Contents

~~Net~~

•The increase in investment related gains (losses) ~~increased by $28~~, net, includes $104 million ~~and decreased by $38~~of changes in the carrying value of investments in limited partnerships considered to be investment companies, $70 million ~~for the three and six months ended June 30, 2020, as compared~~of which 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 ~~2019.~~prior periods. The remaining increase ~~in the second quarter gains was primarily due~~is attributable to ~~an increase in net~~ gains on ~~the sale~~sales of fixed maturity securities ~~available-for-sale and other investments~~ of $2$144 million, ~~and an increase in the fair value of equity securities and derivatives hedging interest of $28 million, partially offset by an increase~~a decrease in the valuation allowance on mortgage loans, as a result of ~~$7 million which is primarily attributed~~assumption updates due to the ~~economic uncertainty caused by COVID-19. Decrease in~~improving view of the ~~first six months~~impact of ~~2020 was primarily due to an increase in~~ the allowance for credit losses on fixed maturity securities available-for-sale of $23 million, an increase in the valuation allowance on mortgage loans of $12 million, primarily attributable to the economic uncertainty caused by COVID-19 pandemic, and ~~decreases~~favorable changes in the fair value of fixed maturity securities available-for-sale and derivatives hedging interest rate risk of $21 million, which were offset by $14 million in net gains on the sale of fixed maturity securities and other investments.derivatives.

Other revenues increased by $7 million and decreased by $18 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The increase in the second quarter was primarily due to favorable foreign exchange rate fluctuation and an increase in the cash surrender value of corporate owned life insurance policies of $5 million. The decrease in the first six months of 2020 was mainly due to a $7 million decrease in the cash surrender value of corporate owned life insurance policies. Additionally, prior year results included a recapture of a collateral finance transaction, which resulted in a $13 million fee paid to the Company. The Company’s RGAx operations contributed $9 million and $16 million to other revenues for the three and six months ended June 30, 2020.

~~Table of Contents~~

Policy acquisition costs and other insurance expense for the three months ended June 30, 2020, was consistent with the same period in 2019. Policy acquisition costs and other insurance expense increased $1 million, or 1.7%, for the six months ended June 30, 2020, as compared to the same period in 2019. Fluctuations period over period were attributable to the offset to capital charges allocated to the operating segments.

Other operating expenses decreased by $6 million, or 8.0%, and $15 million, or 10.3%, for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decrease in other operating expenses for both periods presented was primarily due to lower incentive-based compensation expense as well as lower travel expenses, consulting fees and contract labor expenses.

Interest expense decreased by $1 million, or 2.3%, and was flat for the three and six months ended June 30, 2020, as compared to the same periods in 2019. The decrease in interest expense was primarily due to the variability in tax-related interest expense.

Liquidity and Capital Resources

Overview

The Company believes that cash flows from the source of funds available to it will provide sufficient cash flows for the next twelve months to satisfy the current liquidity requirements of the Company under various scenarios that include the potential risk of early recapture of reinsurance treaties, market events and higher than expected claims associated with the pandemic. Given the uncertainty associated with the COVID-19 pandemic and the related volatility in the financial markets, the Company ~~increased its~~continues to maintain a higher cash and cash ~~equivalents to $4.3 billion as of June 30, 2020, compared to $1.4 billion as of December 31, 2019, an increase of $2.9 billion.~~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, see “the COVID-19 Pandemic” for more information, the Company has multiple liquidity alternatives available based on market conditions and the amount and timing of the liquidity need. These alternatives include borrowings under committed credit facilities, secured borrowings, the ability to issue long-term debt, preferred securities or common equity and, the sale of invested assets subject to market conditions.

In order to enhance the Company’s strong capital and liquidity position, the Company executed two capital market transactions during the quarter. On June 5, 2020, the Company completed an offering of its common stock and received net proceeds of $481 million, and on June 9, 2020, completed a senior debt offering and received net proceeds of $593 million.

Current Market Environment

The Company’s average investment yield, excluding spread business, for the three months ended March 31, 2021, was 5.67%, 159 basis points above the same period in 2020. The increase in average yield is primarily attributable to the aforementioned accounting correction associated with equity method limited partnerships, and an increase in the average invested asset base and overall yield. However, the current ~~low~~ interest rate environment ~~in select markets, primarily the U.S., Canada and Europe,~~ continues to put downward pressure on the Company’s investment yield. The Company’s average investment yield, excluding spread business, for the six months ended June 30, 2020, was 4.07%, 31 basis points below the same period in 2019 due to lower income from limited partnerships. The Company’s insurance liabilities, in particular its annuity products, are sensitive to changing market factors. Gross unrealized gains on fixed maturity securities available-for-sale ~~increased~~decreased from ~~$4.5~~$7.4 billion at December 31, ~~2019~~2020, to ~~$5.9~~$4.7 billion at ~~June 30, 2020. Similarly,~~March 31, 2021, due to tightening credit spreads. Additionally, gross unrealized losses ~~decreased~~increased from ~~$110 million~~$0.2 billion at December 31, ~~2019~~2020, to ~~$448 million~~$0.5 billion at ~~June 30, 2020.~~March 31, 2021.

The Company continues to be in a position to hold any investment security showing an unrealized loss until recovery, provided it remains comfortable with the credit of the issuer. As indicated above, gross unrealized gains on fixed maturity securities of ~~$5.9~~$4.7 billion remain well in excess of gross unrealized losses of ~~$448 million~~$0.5 billion as of ~~June 30, 2020.~~March 31, 2021. The Company does not rely on short-term funding or commercial paper and to date it has experienced no liquidity pressure, nor does it anticipate such pressure in the foreseeable future.

The Company projects its reserves to be sufficient, and it would not expect to write down deferred acquisition costs or be required to take any actions to augment capital, even if interest rates remain at current levels for the next five years, assuming all other factors remain constant. While the Company has felt the pressures of sustained low interest rates and volatile equity markets and may continue to do so, its business and results of operations are not overly sensitive to these risks. Mortality and morbidity risks continue to be the most significant risk for the Company. Although management believes the Company’s current capital base is adequate to support its business at current operating levels, it continues to monitor new business opportunities and any associated new capital needs that could arise from the changing financial landscape.

The Holding Company

RGA is an insurance holding company whose primary uses of liquidity include, but are not limited to, the immediate capital needs of its operating companies, dividends paid to its shareholders, repurchase of common stock and interest payments on its indebtedness. The primary sources of RGA’s liquidity include proceeds from its capital-raising efforts, interest income on undeployed corporate investments, interest income received on surplus notes with RGA Reinsurance, RCM and Rockwood Re and dividends from operating subsidiaries. Total interest and dividend income increased by $147 million and $342 million for the three and six months ended June 30, 2020, as compared to the same periods in 2019 primarily due to cash dividends received from

~~Table of Contents~~

~~operating subsidiaries. As the Company continues its growth efforts, RGA will continue to be dependent upon these sources of liquidity.~~ The following tables provide comparative information for RGA (dollars in millions):

Table of Contents


										Three months ended March 31,
	Three months ended June 30,				Six months ended June 30,						2021		2020
	2020		2019		2020		2019
Interest and dividend income	$	183	$	36	$	408	$	66
Interest expense	50		52		100		100		Interest expense		$	52	$	50
Capital contributions to subsidiaries	18		18		33		39		Capital contributions to subsidiaries		4		15
Issuance of unaffiliated debt	598		599		598		599
Dividends to shareholders	43		38		87		75		Dividends to shareholders		48		44
Issuance of common stock, net of expenses	481		—		481		—
Repurchases of treasury stock	—		—		153		50		Repurchases of treasury stock		—		153
Interest and dividend income									Interest and dividend income		32		226


	March 31, 2021		December 31, 2020
Cash and invested assets	$	1,176	$	1,308

June 30, 2020 December 31, 2019
Cash and invested assets $ 1,513
$ 554

See Item 15, Schedule II – “Condensed Financial Information of the Registrant” in the ~~2019~~2020 Annual Report for additional financial information related to RGA.

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” in the Notes to Consolidated Financial Statements in the ~~2019~~2020 Annual Report. As U.S. Tax Reform generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, the Company does not expect to incur material income taxes if these funds 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, it has in recent years repurchased shares of RGA common stock and paid dividends to RGA shareholders, as authorized by the board of directors. On January 24, 2019, RGA’s ~~current~~board of directors authorized a share repurchase program ~~which was approved by the board of directors in January 2019, authorizes the repurchase of~~for up to $400 million of RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. On May 6, 2020, the Company announced that isit has suspended stock repurchases until further notice. The resumption and pace of repurchase activity depends on various factors such as the level of available cash, the impact of the ongoing COVID-19 pandemic, an evaluation of the costs and benefits associated with alternative uses of excess capital, such as acquisitions and in force reinsurance transactions, and RGA’s stock price.

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


	Three months ended March 31,
	2021		2020
Dividends to shareholders	$	48	$	44
Repurchases of common stock	—		153
Total amount paid to shareholders	$	48	$	197

Number of shares repurchased	—		1,074,413
Average price per share	$	—	$	142.05

In ~~July 2020,~~April 2021, RGA’s board of directors declared a quarterly dividend of $0.70 per share. All future payments of dividends are at the discretion of RGA’s board of directors and will depend on the Company’s earnings, capital requirements, insurance regulatory conditions, operating conditions, and other such factors as the board of directors may deem relevant. The amount of dividends that RGA can pay will depend in part on the operations of its reinsurance subsidiaries. See Note 3 – “Equity” in the Notes to Condensed Consolidated Financial Statements for information on the Company’s share repurchase program.

Certain of the Company’s debt agreements contain financial covenant restrictions related to, among others, liens, the issuance and disposition of stock of restricted subsidiaries, minimum requirements of consolidated net worth, maximum ratios of debt to capitalization and change of control provisions. The Company is required to maintain a minimum consolidated net worth, as defined in the debt agreements, of $5.3 billion, calculated as of the last day of each fiscal quarter. Also, consolidated indebtedness, calculated as of the last day of each fiscal quarter, cannot exceed 35% of the sum of the Company’s consolidated indebtedness plus adjusted consolidated stockholders’ equity. A material ongoing covenant default could require immediate payment of the amount due, including principal, under the various agreements. Additionally, the Company’s debt agreements contain ~~cross-acceleration~~cross-default covenants, which would make outstanding borrowings immediately payable in the event of a material uncured covenant default under any of the agreements, including, but not limited to, non-payment of ~~certain other~~ indebtedness when ~~demanded, and~~due for an amount in excess of the amounts set forth in those agreements, bankruptcy proceedings, or any other event ~~which~~that results in the acceleration of the maturity of ~~such other~~ indebtedness.

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had $3.6 billion, ~~and $3.0 billion, respectively,~~ in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the average ~~net~~ interest rate on long-term debt outstanding was 4.54% ~~and 4.82%, 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 will be used in part to repay the Company’s $400 million 5.000% senior notes due in 2021, and the remainder will be used for general corporate purposes. Capitalized issue costs were approximately $5 million.

On May 15, 2019, RGA issued 3.9% Senior Notes due May 15, 2029, with a face amount of $600 million. This security has been registered with the Securities and Exchange Commission. The net proceeds were approximately $594 million and were used in part to repay upon maturity the Company’s $400 million 6.45% Senior Notes that mature in November 2019. The remainder will be 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 million in cash and obtain letters of credit in multiple currencies on its revolving credit facility that matures in August 2023. As of ~~June 30, 2020~~,March 31, 2021, the Company had no cash borrowings outstanding and ~~$20~~$21 million in issued, but undrawn, letters of credit under this facility.

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 will be used in part to repay the Company’s $400 million 5.00% Senior Notes due in 2021, and the remainder will be used for general corporate purposes. Capitalized issue costs were approximately $5 million.

Based on the historic cash flows and the current financial results of the Company, management believes RGA’s cash flows will be sufficient to enable RGA to meet its obligations for at least the next 12 months.

Credit and Committed Facilities

At ~~June 30, 2020,~~March 31, 2021, the Company maintained an $850 million syndicated revolving credit facility ~~and certain~~in addition to committed letter of credit facilities aggregating ~~to $879 million.~~$1.2 billion. See Note 13 – “Debt” in the Notes to Consolidated Financial Statements in the ~~2019~~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 ~~June 30, 2020,~~March 31, 2021, there were approximately ~~$51~~$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 ~~June 30, 2020, $1.4~~March 31, 2021, $1.5 billion in letters of credit from various banks were outstanding, but undrawn, backing reinsurance between the various subsidiaries of the Company.

The Company’s principal cash inflows from its reinsurance operations include premiums and deposit funds received from ceding companies. The primary liquidity concerns with respect to these cash flows are early recapture of the reinsurance contract by the ceding company and lapses of annuity products reinsured by the Company. The Company’s principal cash inflows from its invested

assets result from investment income and the maturity and sales of invested assets. The primary liquidity concerns with respect to these cash inflows relates to the risk of default by debtors and interest rate volatility. The Company manages these risks very closely. See “Investments” and “Interest Rate Risk” below.

Additional sources of liquidity to meet unexpected cash outflows in excess of operating cash inflows and current cash and equivalents on hand ~~include selling short-term investments or fixed maturity securities and~~ drawing funds under a revolving credit facility, under which the Company had availability of ~~$830~~$829 million as of ~~June 30, 2020.~~March 31, 2021. The Company also has ~~$500~~$349 million of funds available through collateralized borrowings from the FHLB as of ~~June 30, 2020.~~March 31, 2021. As of ~~June 30, 2020,~~March 31, 2021, the Company could have borrowed these additional amounts without violating any of its existing debt covenants.

The Company’s principal cash outflows relate to the payment of claims liabilities, interest credited, operating expenses, income taxes, dividends to shareholders, purchases of treasury stock, and principal and interest under debt and other financing obligations. The Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts (See Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial Statements in the ~~2019~~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 recent action to increase cash and cash equivalents along with its current sources of liquidity are adequate to meet its cash requirements for the next 12 ~~months.~~months, despite the uncertainty associated with the pandemic.

Summary of Primary Sources and Uses of Liquidity and Capital

The Company’s primary sources and uses of liquidity and capital are summarized as follows:

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.



	Six months ended June 30, 2020 and 2019
	Common Stock		Additional Paid In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income		Total
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



Balance, December 31, 2018	$	1	$	1,899	$	7,285		$	(1,371	)	$	636	$	8,450
Adoption of new accounting standards													—
Net income					372								372
Total other comprehensive income (loss)											2,006		2,006
Dividends to stockholders, $1.20 per share					(75		)						(75		)
Purchase of treasury stock								(68		)			(68		)
Reissuance of treasury stock			21		(32		)	35					24
Balance, June 30, 2019	$	1	$	1,920	$	7,550		$	(1,404	)	$	2,642	$	10,709



December 31, 2019:	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total		Impairments in AOCI
Available-for-sale:
Corporate	$	29,205	$	2,269	$	81	$	31,393	61.4	%	$	—
Canadian government	3,016		1,596		—		4,612		9.0		—
RMBS	2,339		62		3		2,398		4.7		—
ABS	2,973		19		14		2,978		5.8		—
CMBS	1,841		61		3		1,899		3.7		—
U.S. government	2,096		57		1		2,152		4.2		—
State and political subdivisions	1,074		93		3		1,164		2.3		—
Other foreign government	4,209		321		5		4,525		8.9		—
Total fixed maturity securities	$	46,753	$	4,478	$	110	$	51,121	100.0	%	$	—



	June 30, 2020				December 31, 2019
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	136	$	148	$	113	$	116
Fixed maturity securities received as collateral	n/a		1,206		n/a		727
Assets in trust held to satisfy collateral requirements	27,353		29,726		27,290		29,239



	Recorded Investment
	Debt Service Ratios						Construction Loans
	>1.20x		1.00x - 1.20x		<1.00x		Construction Loans		Total		% of Total
December 31, 2019:
Loan-to-Value Ratio
0% - 59.99%	$	3,025	$	52	$	7	$	—	$	3,084	53.8	%
60% - 69.99%	1,841		53		11		—		1,905		33.3
70% - 79.99%	492		13		39		—		544		9.5
80% or greater	96		61		37		—		194		3.4
Total	$	5,454	$	179	$	94	$	—	$	5,727	100.0	%



	June 30, 2020		December 31, 2019
31-60 days past due	$	63	$	—
61-90 days past due	9		—
Greater than 90 days	15		—
Total past due	87		—
Current	5,953		5,727
Total	$	6,040	$	5,727



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, 2020:
Interest rate	$	(1	)	$	—	$	(1	)
Currency/Interest rate	13			—		—
Total	$	12		$	—	$	(1	)
For the three months ended June 30, 2019:
Interest rate	$	(10	)	$	—	$	—
Currency/Interest rate	(3		)	—		—
Total	$	(13	)	$	—	$	—

For the six months ended June 30, 2020:
Interest rate	$	(36	)	$	—	$	(1	)
Currency/Interest rate	(13		)	—		—
Total	$	(49	)	$	—	$	(1	)
For the six months ended June 30, 2019:
Interest rate	$	(22	)	$	—	$	1
Currency/Interest rate	(1		)	—		—
Total	$	(23	)	$	—	$	1



	Derivative Gains (Losses) Deferred in AOCI
	For the three months ended June 30,						For the six months ended June 30,
Type of NIFO Hedge	2020			2019			2020		2019
Foreign currency swaps	$	(6	)	$	(2	)	$	9	$	(10	)
Foreign currency forwards	(34		)	(6		)	46		(24		)
Total	$	(40	)	$	(8	)	$	55	$	(34	)


~~(1)~~	~~The rating agency designations are based on ratings from Standard and Poor’s (“S&P”).~~


~~(2)~~	~~Assumes the value of the referenced credit obligations is zero.~~


~~(3)~~	~~The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.~~


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



For the three months ended June 30, 2020:	Fixed maturity securities - available-for-sale																Funds withheld at interest – embedded derivatives			Other assets and liabilities, net – longevity and mortality swaps		Interest-sensitive contract liabilities – embedded derivatives
	Corporate			Foreign govt		Structured securities			U.S. and local govt			Equity securities		Short-term investments			Funds withheld at interest – embedded derivatives
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	—			—		—			—			—		—			—			—		—
Investment related gains (losses), net	(14		)	—		—			—			3		—			1			—		106
Interest credited	—			—		—			—			—		—			—			—		(7		)
Included in other comprehensive income	112			2		17			—			—		—			—			—		—
Other revenues	—			—		—			—			—		—			—			—		—
Purchases⁽¹⁾	79			—		15			—			3		5			—			—		(8		)
Sales⁽¹⁾	(18		)	—		(3		)	—			—		—			—			—		—
Settlements⁽¹⁾	(44		)	—		(18		)	(1		)	—		(1		)	—			—		21
Transfers into Level 3	—			—		—			—			—		—			—			—		—
Transfers out of Level 3	(4		)	—		(2		)	—			—		—			—			—		—
Fair value, end of period	$	2,308		$	17	$	153		$	24		$	62	$	5		$	(108	)	$	—	$	(930	)
Unrealized gains and losses recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Investment income, net of related expenses	$	—		$	—	$	—		$	—		$	—	$	—		$	—		$	—	$	—
Investment related gains (losses), net	(15		)	—		—			—			3		—			1			—		103
Other revenues	—			—		—			—			—		—			—			—		—
Interest credited	—			—		—			—			—		—			—			—		(27		)
Included in other comprehensive income	111			2		16			—			—		—			—			—		—


~~(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)~~	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 on a recurring basis.



Commitment Period:	Maximum Potential Obligation
2035	2,627
2036	3,408
2037	2,850
2038	2,300
2039	11,350



		June 30, 2020						December 31, 2019
NAIC Designation	Rating Agency Designation	Amortized Cost		Estimated Fair Value		% of Total		Amortized Cost		Estimated Fair Value		% of Total
1	AAA/AA/A	$	29,018	$	33,246	63.5	%	$	30,100	$	33,284	65.2	%
2	BBB	15,222		16,555		31.6		14,366		15,514		30.3
3	BB	1,987		1,963		3.8		1,706		1,748		3.4
4	B	560		515		1.0		514		518		1.0
5	CCC and lower	91		46		0.1		36		23		—
6	In or near default	25		21		—		31		34		0.1
	Total	$	46,903	$	52,346	100.0	%	$	46,753	$	51,121	100.0	%


	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Program
January 1, 2021 – January 31, 2021	8,600	$	111.17	—	$	167,573,148
February 1, 2021 – February 29, 2021	3,834	$	114.24	—	$	167,573,148
March 1, 2021 – March 31, 2021	1,355	$	128.09	—	$	167,573,148



	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, 2020 - April 30, 2020	655	$	106.16	—	$	167,573,148
May 1, 2020 - May 31, 2020	63,935	$	86.57	—	$	167,573,148
June 1, 2020 - June 30, 2020	132	$	103.00	—	$	167,573,148


~~(1)~~	RGA had no repurchases of common stock under its share repurchase program for April, May and June 2020. The Company net settled - issuing 2,447, 168,622 and 420 shares from treasury and repurchased from recipients 655, 63,935 and 132 shares in April, May and June 2020, respectively, in settlement of income tax withholding requirements incurred by the recipients of equity incentive awards.



Exhibit Number		Description

~~Exhibit~~ ~~Number~~3.1(i)		~~Description~~

~~3.1(i)~~	Amended and Restated Articles of Incorporation, effective as of May 21, 2020, incorporated by reference to Exhibit 3.1(i) to Current Report on Form 8-K filed on May 22, ~~2020.~~2020 (File No. 1-11848)

3.1(ii)		Certificate of Designation Termination, effective as of May 21, 2020, incorporated by reference to Exhibit 3.1(ii) to Current Report on Form 8-K filed on May 22, ~~2020.~~2020 (File No. 1-11848)

3.2		Amended and Restated Bylaws, effective as of May 23, 2018, incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed on May 24, ~~2018.~~2018 (File No. 1-11848)

~~4.1~~10.1		~~Sixth Supplemental Indenture, dated~~Form of Performance Contingent Share Agreement under RGA Flexible Stock Plan, as ~~of June 9, 2020, between the Company~~amended and ~~The Bank of New York Mellon Trust Company, N.A., as Trustee, incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on June 9, 2020.~~restated effective May 23, 2017*

~~4.2~~10.2		Form of ~~3.150% Senior Note due 2030 (incorporated by reference from Exhibit A to the Supplemental Indenture filed~~Restricted Stock Unit Agreement under RGA Flexible Stock Plan, as ~~Exhibit 4.1 hereto), incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed on June 9, 2020.~~amended and restated effective May 23, 2017*

~~31.1~~10.3		Form of Stock Appreciation Right Award Agreement under RGA Flexible Stock Plan, as amended and restated effective May 23, 2017*

10.4		Form of Non-Qualified Stock Option Agreement under RGA Flexible Stock Plan, as amended and restated effective May 23, 2017*

10.5		Form of Performance Share Unit Agreement under RGA Flexible Stock Plan, as amended and restated effective May 23, 2017*

10.6		Form of Restricted Share Unit Agreement under RGA Flexible Stock Plan, as amended and restated effective May 23, 2017*

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.~~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.~~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.~~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.~~2002

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	Reinsurance Group of America, Incorporated
Date: ~~August 6, 2020~~May 7, 2021	By:	/s/ Anna Manning
		Anna Manning
		President & Chief Executive Officer
		(Principal Executive Officer)
Date: ~~August 6, 2020~~May 7, 2021	By:	/s/ Todd C. Larson
		Todd C. Larson
		Senior Executive Vice President & Chief Financial Officer
		(Principal Financial and Accounting Officer)