UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2008
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11848
REINSURANCE GROUP OF AMERICA, INCORPORATED
(Exact name of Registrant as specified in its charter)
   
MISSOURI
(State or other jurisdiction
of incorporation or organization)
 43-1627032
(IRS employer
identification number)
1370 Timberlake Manor Parkway
Chesterfield, Missouri 63017
(Address of principal executive offices)
(636) 736-7000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes
Yesþ     Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filerþ Accelerated filero Non-accelerated filero Smaller reporting companyo
    (Do not check if a smaller reporting company)  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YesoNoþ
Common stock outstanding ($.01 par value) as of April 30,July 31, 2008: 62,281,40862,323,070 shares.
 
 

 


 

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, 2008 and December 31, 2007   3
     
  Condensed Consolidated Statements of Income (Unaudited)  
  Three months ended March 31, 2008 and 2007   4
     
  Condensed Consolidated Statements of Cash Flows (Unaudited)  
  Three months ended March 31, 2008 and 2007   5
     
  Notes to Condensed Consolidated Financial Statements (Unaudited)   6
     
 Management’s Discussion and Analysis of  
  Financial Condition and Results of Operations 14
     
 Quantitative and Qualitative Disclosures About Market Risk 37
     
 Controls and Procedures 37
     
  PART II - OTHER INFORMATION  
     
 Legal Proceedings 37
     
 Risk Factors 37
     
 Unregistered Sales of Equity Securities and Use of Proceeds 38
     
 Exhibits 38
     
  Signatures 39
     
  Index to Exhibits 40
 302 Certification of Chief Executive Officer
 302 Certification of Chief Financial Officer
 906 Certification of Chief Executive Officer
 906 Certification of Chief Financial Officer
       
Item   Page
  PART I — FINANCIAL INFORMATION    
1 Financial Statements    
       
  Condensed Consolidated Balance Sheets (Unaudited) June 30, 2008 and December 31, 2007  3 
       
  Condensed Consolidated Statements of Income (Unaudited) Three and six months ended June 30, 2008 and 2007  4 
       
  Condensed Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30, 2008 and 2007  5 
       
  Notes to Condensed Consolidated Financial Statements (Unaudited)  6 
       
 Management’s Discussion and Analysis of Financial Condition and Results of Operations  18 
       
 Quantitative and Qualitative Disclosures About Market Risk  45 
       
 Controls and Procedures  45 
       
  PART II — OTHER INFORMATION    
       
 Legal Proceedings  46 
       
 Risk Factors  46 
       
 Unregistered Sales of Equity Securities and Use of Proceeds  47 
       
 Submission of Matters to a Vote of Security Holders  48 
       
 Exhibits  48 
       
  Signatures  49 
       
  Index to Exhibits  50 
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                
 March 31, December 31,  June 30, December 31, 
 2008 2007  2008 2007 
 (Dollars in thousands)  (Dollars in thousands) 
Assets
  
Fixed maturity securities:  
Available-for-sale at fair value (amortized cost of $9,139,814 and $8,916,692 at March 31, 2008 and December 31, 2007, respectively) $9,387,094 $9,397,916 
Available-for-sale at fair value (amortized cost of $9,594,910 and $8,916,692 at June 30, 2008 and December 31, 2007, respectively) $9,667,961 $9,397,916 
Mortgage loans on real estate 812,539 831,557  798,896 831,557 
Policy loans 1,039,464 1,059,439  1,048,517 1,059,439 
Funds withheld at interest 4,650,948 4,749,496  4,825,297 4,749,496 
Short-term investments 46,336 75,062  47,081 75,062 
Other invested assets 389,437 284,220  418,864 284,220 
          
Total investments 16,325,818 16,397,690  16,806,616 16,397,690 
Cash and cash equivalents 304,083 404,351  362,689 404,351 
Accrued investment income 103,755 77,537  106,679 77,537 
Premiums receivable and other reinsurance balances 766,970 717,228  800,404 717,228 
Reinsurance ceded receivables 758,977 722,313  752,203 722,313 
Deferred policy acquisition costs 3,369,316 3,161,951  3,460,294 3,161,951 
Other assets 183,589 116,939  121,282 116,939 
          
Total assets $21,812,508 $21,598,009  $22,410,167 $21,598,009 
          
  
Liabilities and Stockholders’ Equity
  
Future policy benefits $6,449,039 $6,333,177  $6,619,084 $6,333,177 
Interest-sensitive contract liabilities 6,657,546 6,657,061  7,220,659 6,657,061 
Other policy claims and benefits 2,196,089 2,055,274  2,239,868 2,055,274 
Other reinsurance balances 240,137 201,614  173,162 201,614 
Deferred income taxes 707,963 760,633  561,912 760,633 
Other liabilities 567,854 465,358  599,034 465,358 
Short-term debt  29,773   29,773 
Long-term debt 925,893 896,065  926,095 896,065 
Collateral finance facility 850,210 850,361  850,000 850,361 
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company 158,904 158,861  158,946 158,861 
          
Total liabilities 18,753,635 18,408,177  19,348,760 18,408,177 
  
Commitments and contingent liabilities (See Note 7)  
  
Stockholders’ Equity:  
Preferred stock (par value $.01 per share; 10,000,000 shares authorized; no shares issued or outstanding)      
Common stock (par value $.01 per share; 140,000,000 shares authorized; 63,128,273 shares issued at March 31, 2008 and December 31, 2007) 631 631 
Common stock (par value $.01 per share; 140,000,000 shares authorized; 63,128,273 shares issued at June 30, 2008 and December 31, 2007) 631 631 
Warrants 66,915 66,915  66,915 66,915 
Additional paid-in-capital 1,112,977 1,103,956  1,115,540 1,103,956 
Retained earnings 1,556,127 1,540,122  1,660,041 1,540,122 
Accumulated other comprehensive income:  
Accumulated currency translation adjustment, net of income taxes 203,662 221,987  215,582 221,987 
Unrealized appreciation of securities, net of income taxes 167,174 313,170  47,478 313,170 
Pension and postretirement benefits, net of income taxes  (8,199)  (8,351)  (8,082)  (8,351)
          
Total stockholders’ equity before treasury stock 3,099,287 3,238,430  3,098,105 3,238,430 
Less treasury shares held of 893,575 and 1,096,775 at cost at March 31, 2008 and December 31, 2007, respectively  (40,414)  (48,598)
Less treasury shares held of 812,722 and 1,096,775 at cost at June 30, 2008 and December 31, 2007, respectively  (36,698)  (48,598)
          
Total stockholders’ equity 3,058,873 3,189,832  3,061,407 3,189,832 
          
Total liabilities and stockholders’ equity $21,812,508 $21,598,009  $22,410,167 $21,598,009 
          
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                        
 Three months ended March 31,  Three months ended June 30, Six months ended June 30, 
 2008 2007  2008 2007 2008 2007 
 (Dollars in thousands, except per share data)  (Dollars in thousands, except per share data) 
Revenues:
  
Net premiums $1,298,065 $1,125,450  $1,358,555 $1,207,646 $2,656,620 $2,333,096 
Investment income, net of related expenses 199,526 215,743  254,868 274,902 454,394 490,645 
Investment related losses, net  (155,260)  (5,646)  (7,079)  (14,218)  (162,339)  (19,864)
Other revenues 17,936 19,102  36,262 20,446 54,198 39,548 
              
Total revenues 1,360,267 1,354,649  1,642,606 1,488,776 3,002,873 2,843,425 
Benefits and Expenses:
  
Claims and other policy benefits 1,119,512 902,810  1,128,827 980,338 2,248,339 1,883,148 
Interest credited 73,897 61,066  63,000 113,652 136,897 174,718 
Policy acquisition costs and other insurance expenses 16,262 182,981  189,272 178,016 205,534 360,997 
Other operating expenses 63,340 55,422  61,997 56,619 125,337 112,041 
Interest expense 23,094 20,453  21,580 23,232 44,674 43,685 
Collateral finance facility expense 7,474 12,687  6,966 13,206 14,440 25,893 
              
Total benefits and expenses 1,303,579 1,235,419  1,471,642 1,365,063 2,775,221 2,600,482 
Income from continuing operations before income taxes 56,688 119,230  170,964 123,713 227,652 242,943 
Provision for income taxes 20,099 42,293  60,158 44,676 80,257 86,969 
              
Income from continuing operations 36,589 76,937  110,806 79,037 147,395 155,974 
Discontinued operations:  
Loss from discontinued accident and health operations, net of income taxes  (5,084)  (685)  (104)  (1,562)  (5,188)  (2,247)
              
Net income $31,505 $76,252  $110,702 $77,475 $142,207 $153,727 
              
  
Basic earnings per share:
  
Income from continuing operations $0.59 $1.25  $1.78 $1.28 $2.37 $2.53 
Discontinued operations  (0.08)  (0.01)   (0.03)  (0.08)  (0.04)
              
Net income $0.51 $1.24  $1.78 $1.25 $2.29 $2.49 
              
 
Diluted earnings per share:
  
Income from continuing operations $0.57 $1.20  $1.73 $1.22 $2.30 $2.43 
Discontinued operations  (0.08)  (0.01)   (0.02)  (0.08)  (0.04)
              
Net income $0.49 $1.19  $1.73 $1.20 $2.22 $2.39 
              
  
Dividends declared per share
 $0.09 $0.09  $0.09 $0.09 $0.18 $0.18 
              
See accompanying notes to condensed consolidated financial statements (unaudited).

4


REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                
 Three months ended March 31,  Six months ended June 30, 
 2008 2007  2008   2007 
 (Dollars in thousands)  (Dollars in thousands) 
Cash Flows from Operating Activities:
  
Net income $31,505 $76,252  $142,207 $153,727 
Adjustments to reconcile net income to net cash provided by operating activities:  
Change in:  
Accrued investment income  (26,493)  (23,467)  (27,922)  (26,440)
Premiums receivable and other reinsurance balances  (49,386) 38,673   (92,232) 42,087 
Deferred policy acquisition costs  (204,731)  (30,186)  (285,759)  (82,761)
Reinsurance ceded balances  (36,664)  (16,657)  (29,890)  (36,197)
Future policy benefits, other policy claims and benefits, and other reinsurance balances 330,732 183,149  468,180 373,895 
Deferred income taxes 43,762 37,264   (39,703) 77,666 
Other assets and other liabilities, net  (48,290) 17,056  102,314 16,477 
Amortization of net investment premiums, discounts and other  (23,199)  (9,551)  (50,866)  (29,674)
Investment related losses, net 155,260 5,646  162,339 19,864 
Loss on reinsurance embedded derivative 14,347  
Excess tax benefits from share-based payment arrangement  (3,547)  (1,387)  (3,732)  (2,839)
Other, net 5,219 8,306  21,394 9,656 
          
Net cash provided by operating activities 188,515 285,098  366,330 515,461 
  
Cash Flows from Investing Activities:
  
Sales of fixed maturity securities available-for-sale 575,587 465,349  1,237,413 1,132,529 
Maturities of fixed maturity securities available-for-sale 53,521 37,556  81,275 106,051 
Purchases of fixed maturity securities available-for-sale  (832,146)  (795,437)  (1,812,224)  (1,531,894)
Cash invested in mortgage loans on real estate   (27,023)   (91,194)
Cash invested in policy loans  (9,054)  (8,750)
Cash invested in funds withheld at interest  (26,946)  (23,114)  (54,425)  (46,636)
Net increase on securitized lending activities 21,267 47,548  12,806 90,398 
Principal payments on mortgage loans on real estate 18,799 11,147  32,625 24,818 
Principal payments on policy loans 19,975 47  19,976 5,929 
Change in short-term investments and other invested assets  (76,318)  (98,434)  (118,431)  (124,582)
          
Net cash used in investing activities  (246,261)  (382,361)  (610,039)  (443,331)
  
Cash Flows from Financing Activities:
  
Dividends to stockholders  (5,585)  (5,530)  (11,190)  (11,097)
Proceeds from long-term debt issuance  295,311   295,311 
Net repayments under credit agreements   (30,000)   (66,602)
Purchases of treasury stock  (3,093)  (3,611)  (3,104)  (3,611)
Excess tax benefits from share-based payment arrangement 3,547 1,387  3,732 2,839 
Exercise of stock options, net 1,489 4,093  3,981 12,146 
Net change in payables for securities sold under agreements to repurchase 31,912    (30,094)  
Excess payments on universal life and other investment type policies and contracts  (70,750)  (10,363)
Excess deposits (payments) on universal life and other investment type policies and contracts 237,503  (49,443)
          
Net cash provided by (used in) financing activities  (42,480) 251,287 
Net cash provided by financing activities 200,828 179,543 
Effect of exchange rate changes on cash  (42) 770  1,219 2,787 
          
Change in cash and cash equivalents  (100,268) 154,794   (41,662) 254,460 
Cash and cash equivalents, beginning of period 404,351 160,428  404,351 160,428 
          
Cash and cash equivalents, end of period $304,083 $315,222  $362,689 $414,888 
          
  
Supplementary information:  
Cash paid for interest $20,824 $16,902  $52,128 $50,267 
Cash paid for income taxes, net of refunds $12,095 $2,107  $22,250 $22,440 
See accompanying notes to condensed consolidated financial statements (unaudited).

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Basis of Presentation
Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on December 31, 1992. As of June 30, 2008, General American Life Insurance Company (“General American”), a Missouri life insurance company, directly owned approximately 51.7% of the outstanding shares of common stock of RGA. General American is a wholly-owned subsidiary of MetLife, Inc. (“MetLife”), a New York-based insurance and financial services holding company. On June 2, 2008 MetLife and RGA jointly announced a proposed transaction that could lead to MetLife disposing of its majority interest in RGA. The transaction is subject to various conditions, including RGA shareholder and regulatory approvals, and could be completed as early as the third quarter of this year.
The accompanying unaudited condensed consolidated financial statements of Reinsurance Group of America, Incorporated (“RGA”)RGA and its subsidiaries (collectively, the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three-monthsix-month period ended March 31,June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2007 Annual Report on Form 10-K (“2007 Annual Report”) filed with the Securities and Exchange Commission on February 28, 2008.
The accompanying unaudited condensed consolidated financial statements include the accounts of Reinsurance Group of America, Incorporated and its subsidiaries. All intercompany accounts and transactions have been eliminated. The Company has reclassified the presentation of certain prior-period information to conform to the 2008current presentation.
2. Summary of Significant Accounting Policies
Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. In compliance with SFAS No. 157, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.
In accordance with SFAS 157, assets and liabilities recorded at fair value on the condensed consolidated balance sheets are categorized as follows:
 Level 1. Unadjusted quoted prices in active markets for identical assets or liabilities.
 Level 2. Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assts or liabilities.
 Level 3. Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3

6


assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
See Note 5 — “Fair Value Disclosures” for further details on the Company’s assets and liabilities recorded at fair value as of March 31,June 30, 2008.

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3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share on income from continuing operations (in thousands, except per share information):
                        
 Three months ended Three months ended Six months ended
 March 31, 2008 March 31, 2007 June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
      
Earnings:  
Income from continuing operations (numerator for basic and diluted calculations) $36,589 $76,937  $110,806 $79,037 $147,395 $155,974 
Shares:  
Weighted average outstanding shares (denominator for basic calculation) 62,146 61,520  62,283 61,898 62,214 61,710 
Equivalent shares from outstanding stock options 2,084 2,375  1,699 2,643 1,892 2,509 
      
Denominator for diluted calculation 64,230 63,895  63,982 64,541 64,106 64,219 
Earnings per share:  
Basic $0.59 $1.25  $1.78 $1.28 $2.37 $2.53 
Diluted $0.57 $1.20  $1.73 $1.22 $2.30 $2.43 
      
The calculation of common equivalent shares does not include the impact of options or warrants having a strike or conversion price that exceeds the average stock price for the earnings period, as the result would be antidilutive. The calculation of common equivalent shares also excludes the impact of outstanding performance contingent shares, as the conditions necessary for their issuance have not been satisfied as of the end of the reporting period. For the three and six months ended March 31,June 30, 2008, approximately 0.7 million stock options and 0.4 million performance contingent shares were excluded from the calculation. For the three and six months ended March 31,June 30, 2007, approximately 0.3 millionall stock options were included and approximately 0.4 million performance contingent shares were excluded from the calculation.
4. Comprehensive Income
The following schedule reflects the change in accumulated other comprehensive income(dollars in thousands):
                        
 Three months ended Three months ended Six months ended
 March 31, 2008 March 31, 2007 June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
      
Net income $31,505 $76,252  $110,702 $77,475 $142,207 $153,727 
Accumulated other comprehensive income (loss), net of income tax:  
Unrealized gains (losses), net of reclassification adjustment for gains (losses) included in net income  (145,996) 4,643 
Unrealized losses, net of reclassification adjustment for losses included in net income  (119,696)  (136,116)  (265,692)  (131,473)
Currency translation adjustments  (18,325) 14,057  11,920 58,832  (6,405) 72,889 
Unrealized pension and postretirement benefit adjustment 152  (30) 117  (283) 269  (313)
      
Comprehensive income (loss) $(132,664) $94,922  $3,043 $(92) $(129,621) $94,830 
      

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5. Fair Value Disclosures
Effective January 1, 2008, the Company adopted SFAS 157, which defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS 157, among other things, requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s adoption of SFAS 157 resulted in a pre-tax gain of approximately $3.9 million, included in interest credited, related primarily to the decrease in the fair value of liability embedded derivativesderivative liabilities associated with equity-indexed annuity products primarily from the incorporation of nonperformance risk, also referred to as the Company’s own credit risk, into the fair value calculation.
SFAS 157 defines 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. In accordance with SFAS 157, valuation techniques utilized by management for invested assets and embedded derivatives reported at fair value are generally categorized into three types:
Market Approach.Market approach valuation techniques use prices and other relevant information from market transactions involving identical or comparable assets or liabilities. Valuation techniques consistent with the market approach include comparables and matrix pricing. Comparables use market multiples, which might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering both quantitative and qualitative factors specific to the measurement. Matrix pricing is a mathematical technique used principally to value certain securities without relying exclusively on quoted prices for the specific securities but comparing the securities to benchmark or comparable securities.
Income Approach.Income approach valuation techniques convert future amounts, such as cash flows or earnings, to a single present amount, or a discounted amount. These techniques rely on current expectations of future amounts. Examples of income approach valuation techniques include present value techniques, option-pricing models and binomial or lattice models that incorporate present value techniques.
Cost Approach.Cost approach valuation techniques are based upon the amount that, at present, would be required to replace the service capacity of an asset, or the current replacement cost. That is, from the perspective of a market participant (seller), the price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct a substitute asset of comparable utility.
The three approaches described within SFAS 157 are consistent with generally accepted valuation methodologies. While all three approaches are not applicable to all assets or liabilities reported at fair value, where appropriate and possible, one or more valuation techniques may be used. The selection of the valuation method(s) to apply considers the definition of an exit price and the nature of the asset or liability being valued, and significant expertise and judgment is required. The Company performs regular analysis and review of the various methodologies utilized in determining fair value to ensure that the valuation approaches utilized are appropriate and consistently applied, and that the various assumptions are reasonable. This process involves quantitative and qualitative analysis. Examples of procedures performed include, but are not limited to, review of pricing trends and monitoring of recent trade information. In addition, the Company utilizes both internal and external cash flow models to analyze the reasonableness of fair values, where appropriate.
For invested assets reported at fair value, when available, fair values are based on quoted prices in active markets that are regularly and readily obtainable. Generally, these are very liquid investments and the valuation does not require management judgment. When quoted prices in active markets are not available, fair value is based on the market valuation techniques described above, primarily a combination of the market approach, including matrix pricing and the income approach. The assumptions and inputs used by management in applying these methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and assumptions regarding liquidity and future cash flows.
The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market.

8


When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and are consistent with what other market participants would use when pricing such securities.
The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company’s securities holdings.
For embedded derivative liabilities associated with the underlying products in reinsurance treaties, primarily equity-indexed annuity treaties, the Company utilizes a market standard method, which includes an estimate of future equity option purchases and an adjustment for the Company’s own credit risk that takes into consideration the Company’s financial strength rating, also commonly referred to as a claims paying rating. The capital market inputs to the model, such as equity indexes, equity volatility, interest rates and the Company’s credit adjustment, are generally observable. However, the valuation models also use inputs requiring certain actuarial assumptions such as future interest margins, policyholder behavior, including future equity participation rates, and explicit risk margins related to non-capital market inputs, that are generally not observable and may require use of significant management judgment. Changes in interest rates, equity indices, equity volatility, the Company’s own credit risk, and actuarial assumptions regarding policyholder behavior may result in significant fluctuations in the value of embedded derivatives liabilities associated with equity-indexed annuity reinsurance treaties.
The fair value of embedded derivatives associated with funds withheld reinsurance treaties is determined based upon a total return swap methodology with reference to the fair value of the investments held by the ceding Company that support the Company’s funds withheld at interest asset. The fair value of the underlying assets is generally based on market observable inputs using market standard valuation methodologies. However, the valuation also requires certain significant inputs based on actuarial assumptions about policyholder behavior, which are generally not observable.
For the quarter ended June 30, 2008, the application of valuation methodologies applied to similar assets and liabilities has been consistent.
SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets and liabilities include investment securities and derivative contracts that are traded in 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 othermarket standard valuation methodologies and assumptions with significant inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets and liabilities include investment securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value isvalues are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.standard valuation methodologies. This category primarily includes U.S. and foreign corporate securities, Canadian and Canadian provincial government securities, and residential and commercial mortgage-backed securities, among others. MostManagement values most of these securities are valued based on prices provided by third party pricing services withusing inputs that are market observable.
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. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flowmarket standard valuation methodologies or similar techniques, as well as instrumentsdescribed above. When observable inputs are not available, the market standard methodologies for whichdetermining the determination ofestimated fair value requiresof certain securities that trade infrequently, and therefore have little transparency, rely on inputs that are significant to the estimated fair value and that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation.estimation and cannot be supported by reference to market activity.

9


Even though unobservable, management believes these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing similar assets and liabilities. For the Company’s invested assets, this category generally includes U.S. and foreign corporate securities (primarily private placements), asset-backed securities (including those with exposure to subprime mortgages), and to a lesser extent, certain residential and commercial mortgage-backed securities, among others. Certain investment securities are priced via independent, non-binding, broker quotes which utilize inputs that may be difficult to corroborate with observable market data. Such securities are classified in Level 3. Additionally, the Company’s embedded derivatives, all of which are associated with reinsurance treaties, are classified in Level 3 since their values include significant unobservable inputs associated with actuarial assumptions regarding policyholder behavior. Embedded derivatives are reported with the host instruments on the condensed consolidated balance sheet.
As required by SFAS 157, when inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest priority level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gains and losses for such assets and liabilities categorized within Level 3 may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

8


Assets and liabilities measured at fair value on a recurring basis are summarized below(dollars in thousands).
                                
 March 31, 2008  June 30, 2008
 Fair Value Measurements Using:  Fair Value Measurements Using:
 Total Level 1 Level 2 Level 3  Total Level 1 Level 2 Level 3
    
Assets:  
Fixed maturity securities — available-for-sale: 
Fixed maturity securities – available-for-sale: 
U.S. corporate securities $3,313,092 $ $2,487,590 $825,502  $3,372,299 $ $2,574,313 $797,986 
Canadian and Canadian provincial governments 2,113,830  2,087,069 26,761  2,155,928  2,132,109 23,819 
Residential mortgage-backed securities 1,325,631  1,235,210 90,421  1,272,537  1,154,622 117,915 
Foreign corporate securities 1,081,715 1,895 985,762 94,058  1,136,256 1,874 1,014,266 120,116 
Asset-backed securities 446,031  114,375 331,656  452,347  127,134 325,213 
Commercial mortgage-backed securities 686,678  628,144 58,534  842,140  797,134 45,006 
U.S. government and agencies securities 3,656 3,497 159   8,488 1,246 7,242  
State and political subdivision securities 64,074 7,692  56,382  42,609 6,990  35,619 
Other foreign government securities 352,387 117,128 209,407 25,852  385,357 111,347 237,311 36,699 
    
Total fixed maturity securities — available-for-sale 9,387,094 130,212 7,747,716 1,509,166 
Funds withheld at interest — embedded derivatives  (233,618)    (233,618)
Other invested assets — equity securities 163,721 113,748 29,771 20,202 
Other invested assets — derivatives 10,243  10,243  
Reinsurance ceded receivable — embedded derivatives 78,216   78,216 
Total fixed maturity securities – available-for-sale 9,667,961 121,457 8,044,131 1,502,373 
Funds withheld at interest – embedded derivatives  (245,070)    (245,070)
Short-term investments 1,927  1,927  
Other invested assets – equity securities 190,365 138,275 40,751 11,339 
Other invested assets – derivatives 4,853  4,853  
Reinsurance ceded receivable – embedded derivatives 81,163   81,163 
    
Total $9,405,656 $243,960 $7,787,730 $1,373,966  $9,701,199 $259,732 $8,091,662 $1,349,805 
    
  
Liabilities:  
Interest sensitive contract liabilities — embedded derivatives $(585,572) $ $ $(585,572)
Other liabilities — derivatives  (301)   (301)  
Interest sensitive contract liabilities – embedded derivatives $(588,870) $ $ $(588,870)
Other liabilities – derivatives  (4,491)   (4,491)  
    
Total $(585,873) $ $(301) $(585,572) $(593,361) $ $(4,491) $(588,870)
    

10


The tabletables below presents a reconciliationpresent reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended March 31,June 30, 2008(dollars in thousands).
                                                
 Total Fair Value Measurements for the three months ended March 31, 2008  Total Fair Value Measurements for the three months ended June 30, 2008
 Total gains/losses        Total gains/losses      
 (realized/unrealized) included in:        (realized/unrealized) included in:      
 Purchases,      Purchases, Transfers  
 Balance Other issuances Transfers Balance  Balance Other issuances in and/or Balance
 January 1, comprehensive and in and/or March 31,  April 1, comprehensive and out of June 30,
 2008 Earnings income disposals out of Level 3 2008  2008 Earnings, net loss disposals Level 3 2008
    
Assets:  
Fixed maturity securities available-for-sale $1,500,054 $(7,110) $(36,121) $71,283 $(18,940) $1,509,166  $1,509,166 $(442) $(41,661) $55,804 $(20,494) $1,502,373 
Funds withheld at interest — embedded derivatives  (85,090)  (148,528)     (233,618)
Other invested assets — equity securities 13,950 1  (479) 6,730  20,202 
Reinsurance ceded receivable — embedded derivatives 68,298 6,045  3,873  78,216 
Funds withheld at interest – embedded derivatives  (233,618)  (11,452)     (245,070)
Other invested assets – equity securities 20,202 1  (1,241) 7,000  (14,623) 11,339 
Reinsurance ceded receivable – embedded derivatives 78,216  (1,459)  4,406  81,163 
    
Total $1,497,212 $(149,592) $(36,600) $81,886 $(18,940) $1,373,966  $1,373,966 $(13,352) $(42,902) $67,210 $(35,117) $1,349,805 
    
  
Liabilities:  
Interest sensitive contract liabilities — embedded derivatives $(531,160) $(43,678) $ $(10,734) $ $(585,572)
Interest sensitive contract liabilities – embedded derivatives $(585,572) $5,983 $ $(9,281) $ $(588,870)
    
Total $(531,160) $(43,678) $ $(10,734) $ $(585,572) $(585,572) $5,983 $ $(9,281) $ $(588,870)
    
                         
  Total Fair Value Measurements for the six months ended June 30, 2008
      Total gains/losses      
      (realized/unrealized) included in:      
              Purchases, Transfers  
  Balance     Other issuances in and/or Balance
  January 1,     comprehensive and out of June 30,
  2008 Earnings, net loss disposals Level 3 2008
   
Assets:                        
Fixed maturity securities available-for-sale $1,500,054  $(7,552) $(77,782) $127,087  $(39,434) $1,502,373 
Funds withheld at interest – embedded derivatives  (85,090)  (159,980)           (245,070)
Other invested assets – equity securities  13,950   2   (1,720)  13,730   (14,623)  11,339 
Reinsurance ceded receivable – embedded derivatives  68,298   4,586      8,279      81,163 
   
Total $1,497,212  $(162,944) $(79,502) $149,096  $(54,057) $1,349,805 
   
                         
Liabilities:                        
Interest sensitive contract liabilities – embedded derivatives $(531,160) $(37,695) $  $(20,015) $  $(588,870)
   
Total $(531,160) $(37,695) $  $(20,015) $  $(588,870)
   

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The tabletables below summarizessummarize gains and losses due to changes in fair value, including both realized and unrealized gains and losses, recorded in earnings for Level 3 assets and liabilities for the three and six months ended March 31,June 30, 2008(dollars in thousands).
                             
  Total Gains and Losses 
  Classification of gains/losses (realized/unrealized) included in earnings for the three months 
  ended March 31, 2008 
                      Policy    
                      acquisition    
  Investment  Investment      Claims      costs and    
  income, net  related      & other      other    
  of related  gains  Other  policy      insurance    
  expenses  (losses), net  revenues  benefits  Interest credited  expenses  Total 
   
Assets:                            
Fixed maturity
securities —
available-for-sale
 $(188) $(6,922) $  $  $  $  $(7,110)
Funds withheld at interest — embedded derivatives     (148,528)              (148,528)
Other invested assets — equity securities  1                  1 
Reinsurance ceded receivable — embedded derivatives                 6,045   6,045 
   
Total $(187) $(155,450) $  $  $  $6,045  $(149,592)
   
                             
Liabilities:                            
Interest sensitive contract liabilities — embedded derivatives $  $(6,487) $  $451  $(37,642) $  $(43,678)
   
Total $  $(6,487) $  $451  $(37,642) $  $(43,678)
   
 
The table below summarizes changes in unrealized gains or losses recorded in earnings for the three months ended March 31, 2008 for Level 3 assets and liabilities that are still held at March 31, 2008(dollars in thousands).
 
  Changes in Unrealized Gains and Losses 
  Changes in unrealized gains/losses relating to assets and liabilities still held at the reporting 
  date for the three months ended March 31, 2008 
                      Policy    
                      acquisition    
  Investment  Investment      Claims      costs    
  income, net  related      & other      and other    
  of related  gains  Other  policy  Interest  insurance    
  expenses  (losses), net  revenues  benefits  credited  expenses  Total 
Assets:                            
Fixed maturity securities — available-for-sale $(198) $(1,979) $  $  $  $  $(2,177)
Funds withheld at interest — embedded derivatives     (148,528)              (148,528)
Other invested assets — equity securities  1                  1 
Reinsurance ceded receivable — embedded derivatives                 7,811   7,811 
   
Total $(197) $(150,507) $  $  $  $7,811  $(142,893)
   
                             
Liabilities:                            
Interest sensitive contract liabilities — embedded derivatives $  $(6,487) $  $71  $(53,245) $  $(59,661)
   
Total $  $(6,487) $  $71  $(53,245) $  $(59,661)
   
                         
  Total Gains and Losses
  Classification of gains/losses (realized/unrealized) included in earnings for the three months
  ended June 30, 2008
                  Policy  
  Investment     Claims &     acquisition  
  income, net Investment other     costs and other  
  of related related gains policy Interest insurance  
  expenses (losses), net benefits credited expenses Total
   
Assets:                        
Fixed maturity securities – available-for-sale $345  $(787) $  $  $  $(442)
Funds withheld at interest – embedded derivatives     (11,452)           (11,452)
Other invested assets – equity securities  1               1 
Reinsurance ceded receivable – embedded derivatives              (1,459)  (1,459)
   
Total $346  $(12,239) $  $  $(1,459) $(13,352)
   
                         
Liabilities:                        
Interest sensitive contract liabilities – embedded derivatives $  $7,428  $1,271  $(2,716) $  $5,983 
   
Total $  $7,428  $1,271  $(2,716) $  $5,983 
   
                         
  Total Gains and Losses
  Classification of gains/losses (realized/unrealized) included in earnings for the six months
  ended June 30, 2008
                  Policy  
  Investment     Claims &     acquisition  
  income, net Investment other     costs and other  
  of related related gains policy Interest insurance  
  expenses (losses), net benefits credited expenses Total
   
Assets:                        
Fixed maturity securities – available-for-sale $157  $(7,709) $  $  $  $(7,552)
Funds withheld at interest – embedded derivatives     (159,980)           (159,980)
Other invested assets – equity securities  2               2 
Reinsurance ceded receivable – embedded derivatives              4,586   4,586 
   
Total $159  $(167,689) $  $  $4,586  $(162,944)
   
                         
Liabilities:                        
Interest sensitive contract liabilities – embedded derivatives $  $942  $1,721  $(40,358) $  $(37,695)
   
Total $  $942  $1,721  $(40,358) $  $(37,695)
   

1012


The tables below summarize changes in unrealized gains or losses recorded in earnings for the three and six months ended June 30, 2008 for Level 3 assets and liabilities that are still held at June 30, 2008(dollars in thousands).
                         
  Changes in Unrealized Gains and Losses
  Changes in unrealized gains/losses relating to assets and liabilities still held at the reporting
  date for the three months ended June 30, 2008
                  Policy  
  Investment     Claims &     acquisition  
  income, net Investment other     costs and other  
  of related related gains policy Interest insurance  
  expenses (losses), net benefits credited expenses Total
   
Assets:                        
Fixed maturity securities – available-for-sale $354  $(116) $  $  $  $238 
Funds withheld at interest – embedded derivatives     (11,452)           (11,452)
Other invested assets – equity securities  1               1 
Reinsurance ceded receivable – embedded derivatives              (314)  (314)
   
Total $355  $(11,568) $  $  $(314) $(11,527)
   
                         
Liabilities:                        
Interest sensitive contract liabilities – embedded derivatives $  $7,428  $2,419  $(19,845) $  $(9,998)
   
Total $  $7,428  $2,419  $(19,845) $  $(9,998)
   
                         
  Changes in Unrealized Gains and Losses
  Changes in unrealized gains/losses relating to assets and liabilities still held at the reporting
  date for the six months ended June 30, 2008
                  Policy  
  Investment     Claims &     acquisition  
  income, net Investment other     costs and other  
  of related related gains policy Interest insurance  
  expenses (losses), net benefits credited expenses Total
   
Assets:                        
Fixed maturity securities – available-for-sale $156  $(2,095) $  $  $  $(1,939)
Funds withheld at interest – embedded derivatives     (159,980)           (159,980)
Other invested assets – equity securities  2               2 
Reinsurance ceded receivable – embedded derivatives              7,496   7,496 
   
Total $158  $(162,075) $  $  $7,496  $(154,421)
   
                         
Liabilities:                        
Interest sensitive contract liabilities – embedded derivatives $  $942  $2,489  $(73,090) $  $(69,659)
   
Total $  $942  $2,489  $(73,090) $  $(69,959)
   
6. Segment Information
The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 2 of the consolidated financial statements accompanying the 2007 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 other than internally developed software.assets. Investment

13


income is allocated to the segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.
The Company allocates capital to its segments based on an internally developed risk 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 and investment related gains and losses are credited to the segments based on the level of allocated equity. In addition, the segments are charged for excess capital utilized above the allocated economic capital basis. This charge is included in policy acquisition costs and other insurance expenses.
Information related to total revenues, income (loss) from continuing operations before income taxes, and total assets of the Company for each reportable segment are summarized below(dollars in thousands).
               
 Three months ended Six months ended
 June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
  
Total revenues
 
U.S. $942,555 $927,982 $1,654,349 $1,767,063 
Canada 192,430 156,684 363,383 285,478 
Europe & South Africa 194,205 171,242 391,757 344,719 
Asia Pacific 290,454 209,665 545,869 406,922 
Corporate & Other 22,962 23,203 47,515 39,243 
  
Total $1,642,606 $1,488,776 $3,002,873 $2,843,425 
                 
 Income (loss) from continuing 
 Total revenues operations before income taxes  Three months ended Six months ended
 Three months ended March 31, Three months ended March 31,  June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
 2008 2007 2008 2007   
        
Income (loss) from continuing operations before income taxes
 
U.S. $711,794 $839,081 $15,285 $93,177  $109,166 $86,215 $124,451 $179,392 
Canada 170,953 128,794 23,671 15,034  26,778 24,202 50,449 39,236 
Europe & South Africa 197,552 173,477 6,043 21,124  17,041 11,846 23,084 32,970 
Asia Pacific 255,415 197,257 18,563 10,332  21,256 15,609 39,819 25,941 
Corporate and Other 24,553 16,040  (6,874)  (20,437)
Corporate & Other  (3,277)  (14,159)  (10,151)  (34,596)
          
Total $1,360,267 $1,354,649 $56,688 $119,230  $170,964 $123,713 $227,652 $242,943 
      
        
 Total assets        
 March 31, December 31,  Total assets
 2008 2007  June 30, 2008 December 31, 2007
    
U.S. $13,922,798 $13,779,284  $14,601,544 $13,779,284 
Canada 2,820,033 2,738,005  2,824,335 2,738,005 
Europe & South Africa 1,328,742 1,345,900  1,382,268 1,345,900 
Asia Pacific 1,485,924 1,355,111  1,549,589 1,355,111 
Corporate and Other 2,255,011 2,379,709  2,052,431 2,379,709 
    
Total $21,812,508 $21,598,009  $22,410,167 $21,598,009 
    
7. Commitments and Contingent Liabilities
The Company has commitments to fund investments in limited partnerships in the amount of $121.9$105.9 million at March 31,June 30, 2008. The Company anticipates that the majority of these amounts will be invested over the next five years; however, contractually these commitments could become due at the request of the counterparties. Investments in limited partnerships are carried at cost less any other-than-temporary impairments and are included in other invested assets in the condensed consolidated balance sheets.

14


The
In January 2006, the Company is currently a party to awas threatened with an arbitration related to its life reinsurance business. To date, the ceding company involved has not acted upon this threat. As of March 31,June 30, 2008, the partyceding company involved in this action has raised a claim in the amount of $4.9 million, none of which is $4.9 million in excess of the amount held in reservehas been accrued by the Company. The Company believes it has substantial defenses upon which to contest this claim, including but not limited to misrepresentation and breach of contract by direct and indirectthe ceding companies. company.
Additionally, from time to time, the Company is subject to litigation related to employment-related matters in the normal course of its business. The Company cannot predict or determine the ultimate outcome of the pending litigation or arbitrations or provide

11


useful ranges of potential losses. It is the opinion of management, after consultation with counsel, that their outcomes, after consideration of the provisions made in the Company’s condensed consolidated financial statements, would not have acurrently has no such other material adverse effect on its consolidated financial position.litigation. However, it is possible that an adverse outcome on any particular arbitration or litigation situation could from time to time, have a material adverse effect on the Company’s consolidated net income in a particular reporting period.
The Company has obtained letters of credit, issued by banks, 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. At March 31,June 30, 2008 and December 31, 2007, there were approximately $24.0$23.9 million and $22.6 million, respectively, of outstanding bank letters of credit in favor of third parties. Additionally, the Company utilizes letters of credit to secure reserve credits when it retrocedes business to its offshore subsidiaries, including RGA Americas Reinsurance Company, Ltd., and RGA Reinsurance Company (Barbados) Ltd. and RGA Worldwide Reinsurance Company, Ltd. The Company cedes business to its offshore affiliates to help reduce the amount of regulatory capital required in certain jurisdictions, such as the U.S. and the United Kingdom. The capital required to support the business in the offshore affiliates reflects more realistic expectations than the original jurisdiction of the business, where capital requirements are often considered to be quite conservative. As of March 31,June 30, 2008 and December 31, 2007, $411.6$480.4 million and $459.6 million, respectively, in letters of credit from various banks were outstanding between the various subsidiaries of the Company. The Company maintains a syndicated revolving credit facility with an overall capacity of $750.0 million, which is scheduled to mature in September 2012. The Company may borrow cash and may obtain letters of credit in multiple currencies under this facility. As of March 31,June 30, 2008, the Company had $358.0$426.6 million in issued, but undrawn, letters of credit under this facility, which is included in the total above. Applicable letter of credit fees and fees payable for the credit facility depend upon the Company’s senior unsecured long-term debt rating. Fees associated with the Company’s other letters of credit are not fixed for periods in excess of one year and are based on the Company’s ratings and the general availability of these instruments in the marketplace.
RGA has issued guarantees to third parties on behalf of its subsidiaries’ performance for the payment of amounts due under certain credit facilities, reinsurance treaties and an office lease obligation,obligations, whereby if a subsidiary fails to meet an obligation, RGA or one of its other subsidiaries will make a payment to fulfill the obligation. In limited circumstances, treaty guarantees are granted to ceding companies in order to provide them additional security, particularly in cases where RGA’s subsidiary is relatively new, unrated, or not of a significant size. Liabilities supported by the treaty guarantees, before consideration for any legally offsetting amounts due from the guaranteed party, totaled $324.9$337.1 million and $325.1 million as of March 31,June 30, 2008 and December 31, 2007, respectively, and 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 trust preferred securities and credit facilities provide additional security to third parties should a subsidiary fail to make principal and/or interest payments when due. As of March 31,June 30, 2008, RGA’s exposure related to these guarantees was $158.9$159.0 million.
In addition, 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.

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8. Employee Benefit Plans
The components of net periodic benefit costs were as follows(dollars in thousands):
                 
  Three months ended March 31, 
  Pension Benefits  Other Benefits 
  2008  2007  2008  2007 
   
Determination of net periodic benefit cost:
                
Service cost $819  $799  $158  $206 
Interest cost  586   592   145   190 
Expected rate of return on plan assets  (469)  (455)      
Amortization of prior service cost  7   95       
Amortization of prior actuarial loss  72   113   35   84 
   
Net periodic benefit cost $1,015  $1,144  $338  $480 
   
                 
  Three months ended Six months ended
  June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
   
Net periodic pension benefit cost:
                
Service cost $661  $472  $1,480  $1,271 
Interest cost  585   258   1,171   850 
Expected return on plan assets  (469)  (483)  (938)  (938)
Amortization of prior service cost  147   79   154   174 
Amortization of prior actuarial (gain) loss  92   (44)  164   69 
   
Net periodic pension benefit cost $1,016  $282  $2,031  $1,426 
   
                 
Net periodic other benefits cost:
                
Service cost $157  $(63) $315  $143 
Interest cost  145   79   290   269 
Expected return on plan assets            
Amortization of prior service cost     12      12 
Amortization of prior actuarial (gain) loss  36   (2)  71   82 
   
Net periodic other benefits cost $338  $26  $676  $506 
   
The Company made no pension contributions of $4.0 million during the firstsecond quarter of 2008 and expects this to make total contributions of approximately $2.0 million in 2008.be the only contribution for the year.

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9. Equity Based Compensation
Equity compensation expense was $5.4$2.4 million and $6.6$2.9 million in the second quarter of 2008 and 2007, respectively, and $7.8 million and $9.5 million in the first quartersix months of 2008 and 2007, respectively. In the first quarter of 2008, the Company granted 0.4 million incentive stock options at $56.03 weighted average per share and 0.2 million performance contingent units (“PCUs”) to employees. Additionally, non-employee directors were granted a total of 4,800 shares of common stock. As of March 31,June 30, 2008, 1.81.7 million share options at $32.41$32.43 weighted average per share were vested and exercisable with a remaining weighted average exercise period of 4.14.0 years. As of March 31,June 30, 2008, the total compensation cost of non-vested awards not yet recognized in the financial statements was $23.9$20.9 million. It is estimated that these costs will vest over a weighted average period of 2.12.0 years.
10. New Accounting Standards
In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 on its condensed consolidated financial statements.
In February 2008, the FASB issued Staff Position (“FSP”) No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions” (“FSP 140-3”). FSP 140-3 provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. FSP 140-3 is effective prospectively for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of FSP 140-3 on its condensed consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations — A Replacement of FASB Statement No. 141” (“SFAS 141(r)”) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 141(r) establishes principles and requirements for how an acquirer recognizes and measures certain items in a business combination, as well as disclosures about the nature and financial effects of a business combination. SFAS 160 establishes accounting and

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reporting standards surrounding noncontrolling interest, or minority interests, which are the portions of equity in a subsidiary not attributable, directly or indirectly, to a parent. The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company is currently evaluating the impact of SFAS 141(r) on its accounting for future acquisitions and the impact of SFAS 160 on its condensed consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on an instrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company did not elect to apply the fair value option available under SFAS 159 for any of its eligible financial instruments.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on December 31, 1992. As of June 30, 2008, General American Life Insurance Company (“General American”), a Missouri life insurance company, directly owned approximately 51.7% of the outstanding shares of common stock of RGA. General American is a wholly-owned subsidiary of MetLife, Inc. (“MetLife”), a New York-based insurance and financial services holding company. On June 2, 2008 MetLife and RGA jointly announced a proposed transaction that could lead to MetLife disposing of its majority interest in RGA. The transaction is subject to various conditions, including RGA shareholder and regulatory approvals, and could be completed as early as the third quarter of this year.
The Company’s primary business is 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. Each year, however, a portion of the business under existing treaties terminates due to, among other things, lapses or surrenders of underlying policies, deaths of policyholders, and the exercise of recapture options by ceding companies.
The Company derives revenues primarily from renewal premiums from existing reinsurance treaties, new business premiums from existing or new reinsurance treaties, income earned on invested assets, and fees earned from financial reinsurance transactions. The Company believes that industry trends have not changed materially from those discussed in its 2007 Annual Report.
The Company’s profitability primarily depends on the volume and amount of death claims incurred and its ability to adequately price the risks it assumes. While death claims are reasonably predictable over a period of years, claims become less predictable over shorter periods and are subject to significant fluctuation from quarter to quarter and year to year. The maximum amount of coverage the Company retains per life is $8.0 million. Claims in excess of this retention amount are retroceded to retrocessionaires; however, the Company remains fully liable to the ceding company for the entire amount of risk it assumes. The Company believes its sources of liquidity are sufficient to cover potential claims payments on both a short-term and long-term basis.
The Company measures performance based on income or loss from continuing operations before income taxes for each of its five segments. The Company’s U.S., Canada, Europe & South Africa and Asia Pacific operations provide traditional life reinsurance to clients. The Company’s U.S. operations also provide asset-intensive and financial reinsurance products. The Company also provides insurers with critical illness reinsurance in its Canada, Europe & South Africa and Asia Pacific operations. Asia Pacific operations also provide financial reinsurance. The Corporate and Other segment results include the corporate investment activity, general corporate expenses, interest expense of RGA, operations of RGA Technology Partners, Inc., a wholly-owned subsidiary that develops and markets technology solutions for the insurance industry, Argentine privatized pension business in run-off, investment income and expense associated with the Company’s collateral finance facility and the provision for income taxes. The Company’s discontinued accident and health operations are not reflected in its results from continuing operations.
The Company allocates capital to its segments based on an internally developed risk 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 RGA’s businesses. As a result of the economic capital allocation process, a portion of investment income and investment related gains and losses are credited to the segments based on the level of allocated equity. 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.
Results of Operations
Consolidated income from continuing operations before income taxes decreased $62.5increased $47.3 million, or 52.5%38.2%, inand decreased $15.3 million, or 6.3%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. ThisThe increase for the second quarter was primarily due to increased premiums related to growth in assumed insurance in force. The decrease in income for the six months can be largely attributed to unfavorable

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mortality experience in the U.S. and Europe & South Africa segments and an unrealized loss due to an unfavorable change in the value of embedded derivatives within the U.S. segment due to the impact of widening credit spreads in the U.S. debt markets. Offsetting these negative income items for the first six months were increases in premium levels in all segments. Favorable foreign currency exchange fluctuations resulted in an increase to income from continuing operations before income taxes totaling approximately $6.2 million and $13.2 million for the second quarter and first six months of 2008, respectively.
The unrealized loss due to an unfavorable change in value of embedded derivatives is primarily related to reinsurance treaties written on a modified coinsurance or funds withheld basis and subject to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 133 Implementation Issue No. B36, “Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments” (“Issue B36”). Additionally, changes in risk free rates used in the present value calculations of embedded derivatives associated with equity-indexed annuity treaties (“EIAs”) negatively affected income before income taxes.taxes in the first six months of 2008. Unfavorable changes in these two types of embedded derivatives, after adjustment for deferred acquisition costs and retrocession, resulted in a decrease in consolidated income from continuing operations before income taxes of approximately $47.5$45.9 million infor the first quarter ofsix months ended June 30, 2008, as compared to the same period in 2007. These fluctuations do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Therefore, Company management believes it is helpful to distinguish between the effects of changes in these embedded derivatives and

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the primary factors that drive profitability of the underlying treaties, namely investment income, fee income, and interest credited. Additionally, over the expected life of the underlying treaties, management expects the cumulative effect of the embedded derivatives to be immaterial.
Offsetting these negative income items in the first quarter was an increase in premium levels in all segments and favorable mortality experience in the Canada and Asia Pacific segments. Favorable foreign currency exchange fluctuations resulted in an increase to income from continuing operations before income taxes totaling approximately $7.1 million for the first quarter of 2008.
Consolidated net premiums increased $172.6$150.9 million, or 15.3%12.5%, inand $323.5 million, or 13.9%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007, due to growth in life reinsurance in force. Consolidated assumed insurance in force increased to $2.2 trillion for the quarter ended March 31,June 30, 2008 from $2.0 trillion for quarter ended March 31,June 30, 2007. AssumedThe Company added new business production, formeasured by face amount of insurance in force, of $71.6 billion and $81.7 billion during the second quarter, and $148.0 billion and $143.5 billion during the first quartersix months, of 2008 totaled $76.4 billion comparedand 2007, respectively. Management believes industry consolidation and the established practice of reinsuring mortality risks should continue to $61.8 billion in the same period in 2007.provide opportunities for growth, albeit at rates less than historically experienced. Foreign currency fluctuations favorably affected net premiums by approximately $46.5$20.6 million inand $67.0 million for the second quarter and first quartersix months of 2008.2008, respectively.
Consolidated investment income, net of related expenses, decreased $16.2$20.0 million, or 7.5% during7.3%, and $36.3 million, or 7.4%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periods in 2007, primarily due to market value changes related to the Company’s funds withheld at interest investment related to the reinsurance of certain equity indexed annuity products, which are substantially offset by a corresponding change in interest credited to policyholder account balances resulting in a negligible effect on net income. Also offsettingOffsetting the decrease in investment income was a larger invested asset base and a higher effective investment portfolio yield. Invested assets as of March 31,June 30, 2008 totaled $16.3$16.8 billion, a 7.3%an 8.5% increase over March 31,June 30, 2007. The average yield earned on investments, excluding funds withheld, increased to 6.07% in the second quarter of 2008 from 5.90% for the second quarter of 2007. The average yield earned on investments, excluding funds withheld, increased to 6.06% infor the first quartersix months of 2008 from 5.93%5.92% for the first quartersix months of 2007. 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, changes in the mix of the underlying investments, and the timing of dividends and distributions on certain investments.
Investment related losses, net decreased $7.1 million and increased $149.6$142.5 million infor the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. ThisThe large increase for the first six months is primarily due to a $148.5an increase of $155.7 million in the loss inof the aforementioned embedded derivatives related to Issue B36. Investment income and investment related gains and losses are allocated to the operating segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes.
The effective tax rate on a consolidated basis was 35.5%35.2% and 36.1% for the firstsecond quarter of 2008 and 2007.2007, respectively, and 35.3% and 35.8% for the first six months of 2008 and 2007, respectively. These effective tax rates

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were affected by the ongoing application of FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”.
Critical Accounting Policies
The Company’s accounting policies are described in Note 2 in the 2007 Annual Report. The Company believes its most critical accounting policies include the capitalization and amortization of deferred acquisition costs (“DAC”); the establishment of liabilities for future policy benefits, other policy claims and benefits, including incurred but not reported claims; the valuation of investments, derivatives and investment impairments, if any; accounting for income taxes; and the establishment of arbitration or litigation reserves. The balances of these accounts are significant to the Company’s financial position and require extensive use of assumptions and estimates, particularly related to the future performance of the underlying business.
Additionally, for each of the Company’s reinsurance contracts, it must determine if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. The Company must review all contractual features, particularly those that may limit the amount of insurance risk to which the Company is subject or features that delay the timely reimbursement of claims. If the Company determines that the possibility of a significant loss from insurance risk will occur only under remote circumstances, it records the contract under a deposit method of accounting with the net amount receivable or payable reflected in premiums receivable and other reinsurance balances or other reinsurance liabilities on the condensed consolidated balance sheets. Fees earned on the contracts are reflected as other revenues, as opposed to net premiums, on the condensed consolidated statements of income.
Costs of acquiring new business, which vary with and are primarily related to the production of new business, have been deferred to the extent that such costs are deemed recoverable from future premiums or gross profits. Deferred policy acquisition costs reflect the Company’s expectations about the future experience of the business in force and include commissions and allowances as well as certain costs of policy issuance and underwriting. Some of the factors that can affect

15


the carrying value of DAC include mortality assumptions, interest spreads and policy lapse rates. The Company performs periodic tests to determine that DAC remains recoverable, and the cumulative amortization is re-estimated and, if necessary, adjusted by a cumulative charge or credit to current operations.
Liabilities for future policy benefits under long-term life insurance policies (policy reserves) are computed based upon expected investment yields, mortality and withdrawal (lapse) rates, and other assumptions, including a provision for adverse deviation from expected claim levels. The Company primarily relies on its own valuation and administration systems to establish policy reserves. The policy reserves the Company establishes may differ from those established by the ceding companies due to the use of different mortality and other assumptions. However, the Company relies upon its clients to provide accurate data, including policy-level information, premiums and claims, which is the primary information used to establish reserves. The Company’s administration departments work directly with its clients to help ensure information is submitted by them in accordance with the reinsurance contracts. Additionally, the Company performs periodic audits of the information provided by ceding companies. The Company establishes reserves for processing backlogs with a goal of clearing all backlogs within a ninety-day period. The backlogs are usually due to data errors the Company discovers or computer file compatibility issues, since much of the data reported to the Company is in electronic format and is uploaded to its computer systems.
The Company periodically reviews actual historical experience and relative anticipated experience compared to the assumptions used to establish aggregate policy reserves. Further, the Company establishes premium deficiency reserves if actual and anticipated experience indicates that existing aggregate policy reserves, together with the present value of future gross premiums, are not sufficient to cover the present value of future benefits, settlement and maintenance costs and to recover unamortized acquisition costs. The premium deficiency reserve is established through a charge to income, as well as a reduction to unamortized acquisition costs and, to the extent there are no unamortized acquisition costs, an increase to future policy benefits. Because of the many assumptions and estimates used in establishing reserves and the long-term nature of the Company’s reinsurance contracts, the reserving process, while based on actuarial science, is inherently uncertain. If the Company’s assumptions, particularly on mortality, are inaccurate, its reserves may be inadequate to pay claims and there could be a material adverse effect on its results of operations and financial condition.
Other policy claims and benefits include claims payable for incurred but not reported losses, which are determined using case-basis estimates and lag studies of past experience. These estimates are periodically reviewed and any

20


adjustments to such estimates, if necessary, are reflected in current operations. The time lag from the date of the claim or death to the date when the ceding company reports the claim to the Company can be several months and can vary significantly by ceding company and business segment. The Company updates its analysis of incurred but not reported claims, including lag studies, on a periodic basis and adjusts its claim liabilities accordingly. The adjustments in a given period are generally not significant relative to the overall policy liabilities.
The Company primarily invests in fixed maturity securities and monitors these fixed maturity securities to determine potential impairments in value. With the Company’s external investment managers, it evaluates its intent and ability to hold securities, along with factors such as the financial condition of the issuer, payment performance, the extent to which the market value has been below amortized cost, compliance with covenants, general market and industry sector conditions, and various other factors. Securities, based on management’s judgments, with an other-than-temporary impairment in value are written down to management’s estimate of fair value.
Assets and liabilities measured at fair value on a recurring basis are summarized below(dollars in thousands).
                 
  June 30, 2008
      Fair Value Measurements Using:
  Total Level 1 Level 2 Level 3
   
Assets:                
Fixed maturity securities – available-for-sale $9,667,961  $121,457  $8,044,131  $1,502,373 
Funds withheld at interest – embedded derivatives  (245,070)        (245,070)
Short-term investments  1,927      1,927    
Other invested assets – equity securities  190,365   138,275   40,751   11,339 
Other invested assets – derivatives  4,853      4,853    
Reinsurance ceded receivable – embedded derivatives  81,163         81,163 
   
Total $9,701,199  $259,732  $8,091,662  $1,349,805 
   
 
Liabilities:                
Interest sensitive contract liabilities – embedded derivatives $(588,870) $  $  $(588,870)
Other liabilities – derivatives  (4,491)     (4,491)   
   
Total $(593,361) $  $(4,491) $(588,870)
   
The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2008(dollars in thousands).
                         
  Total Fair Value Measurements for the three months ended June 30, 2008
   
      Total gains/losses      
      (realized/unrealized) included in:      
             
            Purchases, Transfers  
  Balance     Other issuances in and/or Balance
  April 1,     comprehensive and out of June 30,
  2008 Earnings, net loss disposals Level 3 2008
   
Assets:                        
Fixed maturity securities available-for-sale $1,509,166  $(442) $(41,661) $55,804  $(20,494) $1,502,373 
Funds withheld at interest – embedded derivatives  (233,618)  (11,452)           (245,070)
Other invested assets – equity securities  20,202   1   (1,241)  7,000   (14,623)  11,339 
Reinsurance ceded receivable – embedded derivatives  78,216   (1,459)     4,406      81,163 
   
Total $1,373,966  $(13,352) $(42,902) $67,210  $(35,117) $1,349,805 
   
                         
Liabilities:                        
Interest sensitive contract liabilities – embedded derivatives $(585,572) $5,983  $  $(9,281) $  $(588,870)
   
Total $(585,572) $5,983  $  $(9,281) $  $(588,870)
   

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  Total Fair Value Measurements for the six months ended June 30, 2008
   
      Total gains/losses      
      (realized/unrealized) included in:      
             
            Purchases, Transfers  
  Balance     Other issuances in and/or Balance
  January 1,     comprehensive and out of June 30,
  2008 Earnings, net loss disposals Level 3 2008
   
Assets:                        
Fixed maturity securities available-for-sale $1,500,054  $(7,552) $(77,782) $127,087  $(39,434) $1,502,373 
Funds withheld at interest — embedded derivatives  (85,090)  (159,980)           (245,070)
Other invested assets — equity securities  13,950   2   (1,720)  13,730   (14,623)  11,339 
Reinsurance ceded receivable — embedded derivatives  68,298   4,586      8,279      81,163 
   
Total $1,497,212  $(162,944) $(79,502) $149,096  $(54,057) $1,349,805 
   
                         
Liabilities:                        
Interest sensitive contract liabilities — embedded derivatives $(531,160) $(37,695) $  $(20,015) $  $(588,870)
   
Total $(531,160) $(37,695) $  $(20,015) $  $(588,870)
   
Level 3 assets were 13.9% of total assets measured at fair value and Level 3 liabilities were 99.2% of total liabilities measured at fair value as of June 30, 2008. Transfers in and out of Level 3 for the period ended June 30, 2008 were not significant.
Asset-backed securities (“ABS”) represented approximately 21.6% of Level 3 fixed maturity securities available-for-sale and 24.1% of total Level 3 assets as of June 30, 2008. ABS primarily represents sub-prime and Alt-A securities which are classified as Level 3 due to the lack of liquidity in the market along with illiquid bank loan collateralized debt obligations. While the fair value of these investments, as well as others within the Company’s portfolio of fixed maturity securities available-for-sale, has declined in recent quarters due to increased credit spreads in the financial markets, the Company believes the investment fundamentals remain sound, and the ultimate value that will be realized from these investments is greater than that reflected by their current fair value.
See Note 5 — “Fair Value Disclosures” in the Notes to Condensed Consolidated Financial Statements and the discussion of “Investments” in the “Liquidity and Capital Resources” section of Management’s Discussion and Analysis for additional information on the Company’s assets and liabilities recorded at fair value as of June 30, 2008.
Differences in experience compared with the assumptions and estimates utilized in the justification of the recoverability of DAC, in establishing reserves for future policy benefits and claim liabilities, or in the determination of other-than-temporary impairments to investment securities can have a material effect on the Company’s results of operations and financial condition.
Income taxes represent the net amount of income taxes that the Company expects to pay to or receive from various taxing jurisdictions in connection with its operations. The Company provides for federal, state and foreign income taxes currently payable, as well as those deferred due to temporary differences between the financial reporting and tax bases of assets and liabilities. The Company’s accounting for income taxes represents management’s best estimate of various events and transactions.
Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction.

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Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established as well as the amount of

22


such allowances. When making such determination, consideration is given to, among other things, the following:
(i)future taxable income exclusive of reversing temporary differences and carryforwards;
(ii)future reversals of existing taxable temporary differences;
(iii)taxable income in prior carryback years; and
(iv)(i) future taxable income exclusive of reversing temporary differences and carryforwards;
(ii) future reversals of existing taxable temporary differences;
(iii) taxable income in prior carryback years; and
(iv) tax planning strategies.
The Company may be required to change its provision for income taxes in certain circumstances. Examples of such circumstances include when the ultimate deductibility of certain items is challenged by taxing authorities or when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events such as changes in tax legislation could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the condensed consolidated financial statements in the period these changes occur.
In accordance with SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), valuation techniques used for assets and embedded derivative liabilities accounted for at fair value are generally categorized into three types:
Market Approach. Market approach valuation techniques use prices and other relevant information from market transactions involving identical or comparable assets or liabilities. Valuation techniques consistent with the market approach include comparables and matrix pricing. Comparables use market multiples, which might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering both quantitative and qualitative factors specific to the measurement. Matrix pricing is a mathematical technique used principally to value certain securities without relying exclusively on quoted prices for the specific securities but comparing the securities to benchmark or comparable securities.
Income Approach. Income approach valuation techniques convert future amounts, such as cash flows or earnings, to a single present amount, or a discounted amount. These techniques rely on current expectations of future amounts. Examples of income approach valuation techniques include present value techniques, option-pricing models and binomial or lattice models that incorporate present value techniques.
Cost Approach. Cost approach valuation techniques are based upon the amount that, at present, would be required to replace the service capacity of an asset, or the current replacement cost. That is, from the perspective of a market participant (seller), the price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct a substitute asset of comparable utility.
The three approaches described within SFAS 157 are consistent with generally accepted valuation methodologies. While all three approaches are not applicable to all assets or liabilities accounted for at fair value, where appropriate and possible, one or more valuation techniques may be used. The selection of the valuation method(s) to apply considers the definition of an exit price and the nature of the asset or liability being valued and significant expertise and judgment is required. For assets and liabilities accounted for at fair value, valuation techniques are generally a combination of the market and income approaches. For the quarter ended March 31, 2008, the application of valuation techniques applied to similar assets and liabilities has been consistent. Changes in interest rates, including credit spreads and the Company’s own credit risk, can have a significant impact on the fair value calculations. Additionally, changes in the actuarial assumptions regarding policyholder behavior may result in significant fluctuations in embedded derivative liabilities associated with equity-indexed annuity reinsurance treaties.
Level 3 assets were 14.6% of total assets measured at fair value and Level 3 liabilities were 99.9% of total liabilities measured at fair value as of March 31, 2008. Transfers in and out of Level 3 for the period ended March 31, 2008 were not significant. Please refer to Note 5 – “Fair Value Disclosures” in the Notes to Condensed Consolidated Financial Statements for additional information on the Company’s assets and liabilities recorded at fair value as of March 31, 2008.
The Company at times is a party to various litigation and arbitrations. The Company cannot predict or determine the ultimate outcome of any pending litigation or arbitrations or even provide useful ranges of potential losses. It is the opinion of management, after consultation with counsel, that the outcomes of such litigation and arbitrations, after consideration of the

17


provisions made in the Company’s condensed consolidated financial statements, would not have a material adverse effect on its consolidated financial position. However, it is possible that an adverse outcome on any particular arbitration or litigation situation could from time to time, have a material adverse effect on the Company’s consolidated net income in a particular reporting period.
Further discussion and analysis of the results for 2008 compared to 2007 are presented by segment. References to income before income taxes exclude the effects of discontinued operations.
U.S. OPERATIONS
U.S. operations consist of two major sub-segments: Traditional and Non-Traditional. The Traditional sub-segment primarily specializes in mortality-risk reinsurance. The Non-Traditional sub-segment consists of Asset-Intensive and Financial Reinsurance.
For the three months ended March 31,June 30, 2008 (dollars in thousands)
                                
 Non-Traditional Total   Non-Traditional Total
 Asset- Financial U.S.   Asset- Financial U.S.
 Traditional Intensive Reinsurance Operations Traditional Intensive Reinsurance Operations
    
Revenues:
  
Net premiums $725,393 $1,663 $ $727,056  $752,831 $1,592 $ $754,423 
Investment income, net of related expenses 97,431 25,031 40 122,502  97,462 80,920 356 178,738 
Investment related losses, net  (2,508)  (149,554)  (1)  (152,063)  (637)  (9,044)  (2)  (9,683)
Other revenues 60 11,495 2,744 14,299  552 14,211 4,314 19,077 
    
Total revenues 820,376  (111,365) 2,783 711,794  850,208 87,679 4,668 942,555 
 
Benefits and expenses:
  
Claims and other policy benefits 651,850 185  652,035  624,310 865  625,175 
Interest credited 14,790 58,968  73,758  14,924 47,995  62,919 
Policy acquisition costs and other insurance expenses 86,050  (131,750) 198  (45,502) 103,231 27,086 250 130,567 
Other operating expenses 13,238 2,334 646 16,218  12,121 1,840 767 14,728 
    
Total benefits and expenses 765,928  (70,263) 844 696,509  754,586 77,786 1,017 833,389 
  
Income (loss) before income taxes $54,448 $(41,102) $1,939 $15,285 
Income before income taxes $95,622 $9,893 $3,651 $109,166 
    

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For the three months ended March 31,June 30, 2007 (dollars in thousands)
                                
 Non-Traditional Total   Non-Traditional Total
 Asset- Financial U.S.   Asset- Financial U.S.
 Traditional Intensive Reinsurance Operations Traditional Intensive Reinsurance Operations
    
Revenues:
  
Net premiums $669,419 $1,626 $ $671,045  $718,753 $1,598 $ $720,351 
Investment income, net of related expenses 84,928 67,952 20 152,900  87,151 117,319 99 204,569 
Investment related gains (losses), net  (338) 2,055  1,717 
Investment related losses, net  (4,497)  (8,270)  (7)  (12,774)
Other revenues 106 7,424 5,889 13,419  300 9,690 5,846 15,836 
    
Total revenues 754,115 79,057 5,909 839,081  801,707 120,337 5,938 927,982 
  
Benefits and expenses:
  
Claims and other policy benefits 542,586 4,523 1 547,110  594,619  (553)  594,066 
Interest credited 14,270 46,158  60,428  14,579 98,324  112,903 
Policy acquisition costs and other insurance expenses 99,380 22,293 2,194 123,867  101,807 16,750 2,001 120,558 
Other operating expenses 11,868 1,621 1,010 14,499  11,604 1,705 931 14,240 
    
Total benefits and expenses 668,104 74,595 3,205 745,904  722,609 116,226 2,932 841,767 
  
Income before income taxes $86,011 $4,462 $2,704 $93,177  $79,098 $4,111 $3,006 $86,215 
    
For the six months ended June 30, 2008 (dollars in thousands)
                 
    Non-Traditional Total
      Asset- Financial U.S.
  Traditional Intensive Reinsurance Operations
   
Revenues:
                
Net premiums $1,478,224  $3,255  $  $1,481,479 
Investment income, net of related expenses  194,893   105,951   396   301,240 
Investment related losses, net  (3,145)  (158,598)  (3)  (161,746)
Other revenues  612   25,706   7,058   33,376 
   
Total revenues  1,670,584   (23,686)  7,451   1,654,349 
                 
Benefits and expenses:
                
Claims and other policy benefits  1,276,160   1,050      1,277,210 
Interest credited  29,714   106,963      136,677 
Policy acquisition costs and other insurance expenses  189,281   (104,664)  448   85,065 
Other operating expenses  25,359   4,174   1,413   30,946 
   
Total benefits and expenses  1,520,514   7,523   1,861   1,529,898 
                 
Income (loss) before income taxes $150,070  $(31,209) $5,590  $124,451 
   
For the six months ended June 30, 2007 (dollars in thousands)
                 
    Non-Traditional Total
      Asset- Financial U.S.
  Traditional Intensive Reinsurance Operations
   
Revenues:
                
Net premiums $1,388,172  $3,224  $  $1,391,396 
Investment income, net of related expenses  172,079   185,271   119   357,469 
Investment related losses, net  (4,835)  (6,215)  (7)  (11,057)
Other revenues  406   17,114   11,735   29,255 
   
Total revenues  1,555,822   199,394   11,847   1,767,063 
                 
Benefits and expenses:
                
Claims and other policy benefits  1,137,205   3,970   1   1,141,176 
Interest credited  28,849   144,482      173,331 
Policy acquisition costs and other insurance expenses  201,187   39,043   4,195   244,425 
Other operating expenses  23,472   3,326   1,941   28,739 
   
Total benefits and expenses  1,390,713   190,821   6,137   1,587,671 
                 
Income before income taxes $165,109  $8,573  $5,710  $179,392 
   

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Income before income taxes for the U.S. operations segment increased by $23.0 million, or 26.6%, and decreased by $77.9$54.9 million, or 83.6%30.6%, infor the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. The increase for the three month period can be attributed to growth in total business in force. This decrease in income year to date can be largely attributed to unfavorable mortality experience of approximately $50.0 million in the impactfirst quarter of 2008, changes in risk free rates used in the present value calculations of embedded derivatives associated

18


with EIAs and changes in creditmarket spreads associated with embedded derivatives subject to Issue B36. Adverse mortality contributed approximately $50.0B36 of $33.3 million ofand the unfavorable variance. The impact of changes in risk free rates used in the present value calculations of embedded derivatives associated with EIAs and changes in credit spreads associated with embedded derivatives subject to Issue B36 (described below in the Asset-Intensive sub-segment) had a significant impact on income, contributing a $46.8 million loss in the current quarter compared to income of $0.7 million for the same period in 2007.$12.6 million. Offsetting these negative income items was overall growth in total business in force as evidenced by the increase in net premiums quarter over quarter, increased investment income and certain favorable reserve adjustments recognized in the Traditional sub-segment.premiums.
Traditional Reinsurance
The U.S. Traditional sub-segment provides life reinsurance to domestic clients for a variety of life products through yearly renewable term, coinsurance and modified coinsurance agreements. These reinsurance arrangements may beinvolve either facultative or automatic agreements. During the first quarter of 2008, thisThis sub-segment added new business production, of $34.7 billion, measured by face amount of insurance in force, compared to $40.2of $35.5 billion asand $44.1 billion during the second quarter, and $70.2 billion and $84.4 billion during the first six months, of the same period in 2007.2008 and 2007, respectively. Management believes industry consolidation and the established practice of reinsuring mortality risks should continue to provide opportunities for growth.growth, albeit at rates less than historically experienced.
Income before income taxes for the U.S. Traditional sub-segment decreased $31.6increased by $16.5 million, or 36.7%20.9%, inand decreased by $15.0 million, or 9.1% for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. ThisStronger premiums and higher investment income were the primary contributors to the increase for the second quarter of 2008 compared to 2007. The six months decrease in 2008 compared to 2007 was primarily due to adverse mortality experience in the first quarter of 2008.
Net premiums for the U.S. Traditional sub-segment increased $56.0grew $34.1 million, or 8.4%4.7%, inand $90.1 million, or 6.5% for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. This increaseThese increases in net premiums waswere driven primarily by the growth of total U.S. Traditional business in force, which totaled just over $1.2$1.3 trillion of face amount as of March 31,June 30, 2008. This represents a 5.9%4.7% increase over the amount in force on March 31,June 30, 2007.
Net investment income increased $12.5$10.3 million, or 14.7%11.8%, inand $22.8 million, or 13.3%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. This increaseThese increases can be attributed to growth in the invested asset base and increased portfolio return. Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.
Claims and other policy benefits as a percentage of net premiums (“loss ratios”) were 89.9% in82.9% and 82.7% for the firstsecond quarter of 2008 and 2007, respectively, and 86.3% and 81.9% for the six months ended June 30, 2008 and 2007, respectively. The second quarter 2008 loss ratio increased slightly when compared to 81.1% in 2007. The higherthe prior year; however, the loss ratio infor the first six months of 2008 isincreased substantially compared to the prior year due to very unfavorable mortality experience compared toduring the prior year.first quarter of 2008. Increases in the total claim count and the level of large claims were major contributors to claims being approximately $50.0 million higher than expected.expected in the first quarter of 2008. Although reasonably predicablepredictable over a period of years, death claims arecan be volatile over shorter periods. Management has completed an extensive review of the level and mix of claims and views recent experience as normal volatility that is inherent in the business.
Interest credited expense increased $0.5$0.3 million, or 3.6%2.4%, inand $0.9 million, or 3.0%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. The increase isThese increases are the result of one treaty that had a slight increase in its asset base with a credited loan rate remaining constant at 5.6% for 2007 and 2008. Interest credited in this case relates to amounts credited on cash value products which also have a significant mortality component. The amount of interest credited fluctuates in step with changes in deposit levels, cash surrender values and investment performance. 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 11.9% in13.7% and 14.2% for the firstsecond quarter of 2008 compared to 14.8% in 2007.and 2007, respectively, and 12.8% and 14.5% for the six months ended June 30, 2008 and 2007, respectively. Overall, while these ratios are expected to remain in a predictable range, they may fluctuate

25


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. Finally, 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 increased $1.4$0.5 million, or 11.5%4.5%, inand $1.9 million, or 8.0% for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. Other operating expenses, as a percentage of net premiums, remained relatively constant at 1.6% and 1.7%, respectively, for the same at 1.8% for firstsecond quarter ofand six months ended June 30, 2008 and 2007. The expense ratio can fluctuate slightly from period to period.

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Asset-Intensive Reinsurance
The U.S. Asset-Intensive sub-segment assumes investment risk within underlying annuities and corporate-owned life insurance policies. Most of these agreements are coinsurance, coinsurance with funds withheld or modified coinsurance of non-mortality risks whereby the Company recognizes profits or losses primarily from the spread between the investment income earned and the interest credited on the underlying deposit liabilities.
This sub-segment reported a lossIncome before income taxes of $41.1for this sub-segment increased by $5.8 million, and decreased by $39.8 million for the first quarter ofthree and six months ended June 30, 2008, as compared to income of $4.5 millionthe same periods in 2007. The decrease for the first quarter of 2007. The unrealized loss duesix month period can be attributed to anthe unfavorable change in the value of embedded derivatives, after adjustment for deferred acquisition costs under Issue B36;B36, combined with the negative impact of changes in risk free rates usedan increase in the present value calculations of embedded derivatives associated with EIAs,EIAs. Collectively, these items contributed $46.8$46.7 million to the loss induring the first six months of 2008 and $0.7compared to $0.9 million toduring the income infirst six months of 2007.
In accordance with the provisions of Issue B36, the Company recorded a gross change in value of embedded derivatives of $(148.5)$(160.0) million for the first quartersix months of 2008, within investment related losses, net. The amount represents a non-cash, unrealized change in value and was somewhat offset by $(115.9) milliona reduction in policy acquisition costs and other insurance expenses associated with an adjustment of related deferred acquisition costs totaling $(125.9) million, for a total net contribution of $32.6$34.1 million to the loss before income taxes. Significant fluctuations may occur as the fair value of the embedded derivatives is tied primarily to the movements in creditmarket spreads. During the quarter, management estimates thefirst six months, weighted average asset credit spreads widened by approximately 0.71 %. This was somewhat offset by a decrease in risk free rate of approximately 0.44 %.0.75%. Additionally, the Company uses risk free rates, in accordance with FAS 157, to discount the fair value of estimated future equity option purchases associated with its reinsurance of EIAs (a component of the embedded derivative), which increased the fair value of the embedded derivative liability. The impact from the change in risk free rates over the first six months is anthe primary driver for the increase in the gross embedded liability of $64.5$55.2 million, which was recorded as expense within interest credited. This increase was partially offset by $(50.4) million of related deferred acquisition costs and retrocession of $(42.6) million for a net contribution of $14.1$12.6 million to the loss before income taxes. These fluctuations do not affect current cash flows, crediting rates or spread performance on the underlying treaties. Therefore, Company management believes it is helpful to distinguish between the effects of changes in these embedded derivatives and the primary factors that drive profitability of the underlying treaties, namely investment income, fee income, and interest credited. Additionally, over the expected life of the underlying treaties, management expects the cumulative effect of the impact of changes in risk free rates used in the present value calculations of embedded derivatives associated with EIAs and Issue B36 to be immaterial.
Excluding the impact of changes in risk free rates and creditmarket spreads used in the present value calculations of embedded derivatives associated with EIAs and Issue B36, income before income taxes increased $1.9$4.1 million, or 52.4%72.7%, inand $6.1 million, or 64.7%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. The increaseThese increases can be attributed to continued growth in business and improved mortality experience in a single universal life treaty for the comparable periods. These gains were partially offset by poor performance in equity markets and the widening of credit spreads.
Total revenues, which are comprised primarily of investment income and investment related losses, net, decreased $190.4$32.7 million inand $223.1 million for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. The losses associated with embedded derivatives subject to Issue B36, which are included in investment related losses, net, represented $151.4$4.3 million and $155.7 million of the decrease.decreases for the second quarter and six month periods, respectively. Excluding the losses associated with embedded derivatives subject to Issue B36, revenue decreased $39.0$28.4 million and $67.4 million for the second quarter and six month periods, respectively,

26


primarily due to a drop in investment income related to option income on a funds withheld treaty. This decrease is partially offset by a corresponding decrease in interest credited.
The average invested asset base supporting this sub-segment grew to $4.8$4.9 billion in the firstsecond quarter of 2008 from $4.6$4.7 billion in the firstsecond quarter of 2007. The growth in the asset base is primarily driven by new business written on one existing equity indexed and variable annuity treaty.treaties. In addition, a new fixed annuity transaction was executed in the second quarter of 2008, adding approximately $448.7 million to the asset base of this sub-segment. Invested assets outstanding were $4.7$5.2 billion as of March 31,June 30, 2008 andcompared to $4.7 billion in 2007. As of March 31,June 30, 2008, $3.6 billion of the invested asset baseassets were funds withheld at interest, of which 90.7% is slightly lower than the average as the outstanding balance reflects a drop in option value since the end of 2007.associated with one client. As of March 31, 2008,June 30, 2007, $3.4 billion of the invested assets were funds withheld at interest, of which 90.8% is associated with one client. As of March 31, 2007, $3.2 billion of the invested assets were funds withheld balance of which 90.7%91.5% of the balance was associated with one client.
Total benefits and expenses, which are comprised primarily of interest credited and policy acquisition costs, decreased $144.9$38.4 million inand $183.3 million for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. Contributing to the decreasethese decreases was a decreasereduction in expenses related to embedded derivatives subject to Issue B36 of $118.0$4.4 million partially offset by an increase in the expenses related to the impact of changes in risk free rates used in the present value calculations of embedded derivatives associatedand $122.4 million, coupled with EIAs of $14.1 million. Excluding both the impact of changes in risk free rates and credit spreads used in the present value calculations of embedded derivatives associated with EIAs and embedded derivatives subject to Issue B36,

20


expenses decreased $41.0 million. This decrease is primarily due to a decrease in interest credited.credited of $50.3 million and $37.5 million for the three and six month periods, respectively. As mentioned above, a large part of thisthe decrease in interest credited relates to market value changes in certain equity indexed annuity products and is offset in investment income.
Financial Reinsurance
The U.S. Financial Reinsurance sub-segment income consists primarily of net fees earned on financial reinsurance transactions. The majority of the financial reinsurance risks are assumed by the CompanyU.S. segment and retroceded to other insurance companies or brokered business in which the company assumes littleCompany does not participate in the assumption of risk. The fees earned from financial reinsurance contracts are reflected in other revenues, and the fees paid to retrocessionaires are reflected in policy acquisition costs and other insurance expenses. Fees earned on brokered business are reflected in other revenues.
Income before income taxes decreased $0.8increased by $0.6 million, or 28.3%21.5%, inand decreased by $0.1 million, or 2.1%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. At March 31,June 30, 2008 and 2007, the amount of reinsurance provided, as measured by pre-tax statutory surplus, was $0.5 billion and $1.1 billion, respectively. The decrease in reinsurance provided is primarily the result of the recapture of one treaty which totaled $0.5$0.6 billion at the end of firstthe second quarter 2007. The pre-tax statutory surplus amounts indicated include all business assumed or brokered by the Company in the U.S. 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.
CANADA OPERATIONS
The Company conducts reinsurance business in Canada through RGA Life Reinsurance Company of Canada (“RGA Canada”), a wholly-owned subsidiary. RGA Canada assists clients with capital management activity and mortality and morbidity risk management, and is primarily engaged in traditional individual life reinsurance, as well as creditor, critical illness, and group life and health 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 life insurance.
                 
  For the three months ended For the six months ended
(dollars in thousands) June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
   
Revenues:
                
Net premiums $139,530  $122,580  $278,522  $222,072 
Investment income, net of related expenses  35,692   32,363   71,725   58,795 
Investment related gains (losses), net  4,004   1,648   (81)  4,432 
Other revenues  13,204   93   13,217   179 
   
Total revenues  192,430   156,684   363,383   285,478 

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For the three months ended March 31, (dollars in thousands)Continued
                        
 2008 2007 For the three months ended For the six months ended
  
Revenues:
 
Net premiums $138,992 $99,492 
Investment income, net of related expenses 36,033 26,432 
Investment related gains (losses), net  (4,085) 2,784 
Other revenues 13 86 
  
Total revenues 170,953 128,794 
(dollars in thousands) June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
   
Benefits and expenses:
  
Claims and other policy benefits 115,271 91,148  134,146 105,667 249,417 196,815 
Interest credited 139 186  81 185 220 371 
Policy acquisition costs and other insurance expenses 26,426 18,476  25,526 21,343 51,952 39,819 
Other operating expenses 5,446 3,950  5,899 5,287 11,345 9,237 
    
Total benefits and expenses 147,282 113,760  165,652 132,482 312,934 246,242 
  
Income before income taxes $23,671 $15,034  $26,778 $24,202 $50,449 $39,236 
    
Income before income taxes increased by $8.6$2.6 million, or 57.4%10.6%, inand $11.2 million or 28.6%, for the first quarter ofthree and six months ended June 30 2008, as compared to the same periodperiods in 2007. Strength in the Canadian dollar resulted in an increase to income before income taxes totaling approximately $4.7$2.4 million forand $7.1 million in the second quarter and first quartersix months of 2008.2008, respectively. The remaining increaseincreases in 2008 waswere primarily the result of income of $2.5 million from the recapture of a previously retroceded block of creditor business, as well as higher premium volume and favorable mortality experience inexperience. The increase for the current periodfirst six months was offset by a decrease of $6.9$4.5 million in investment related gains and losses, net.
Net premiums increasedgrew by $39.5$17.0 million, or 39.7%13.8%, inand $56.5 million, or 25.4%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. A stronger Canadian dollar resulted in an increase in net premiums of approximately $19.8$11.3 million and $31.2 million in the second quarter and first quartersix months of 2008, compared to 2007.respectively. The remaining increase isincreases are primarily due to new business from both new and existing treaties. In addition, an increaseincreases in premiumpremiums from creditor treaties contributed $9.1$2.2 million and $11.3 million in the second quarter and first quartersix months of 2008.2008, respectively. Creditor and group life and health premiums represented 19.5%18.4% and 18.2%19.7% of net premiums in the second quarter and first quartersix months of 2008, and 2007, respectively. Premium levels can be significantly influenced by large transactions, mix of business and reporting practices of ceding companies and therefore may fluctuate from period to period.

21


Net investment income increased $9.6$3.3 million, or 36.3%10.3%, inand $12.9, or 22.0%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same period in 2007. A stronger Canadian dollar resulted in an increase in net investment income of approximately $5.2$2.9 million and $8.2 million in the second quarter and first quartersix months of 2008.2008, respectively. Investment income and investment related gains and losses are allocated to the segments based upon average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments. The increase in investment income was mainly the result of an increase in the allocated asset base due to growth in the underlying business volume.
Other revenues increased by $13.1 million, and $13.0 million, for the three and six months ended June 30, 2008, as compared to the same periods in 2007. The increases in 2008 were primarily the result of a fee earned of $12.9 million from the recapture of a previously retroceded block of creditor business.
Loss ratios for this segment were 82.9% in96.1% and 86.2% for the firstsecond quarter of 2008 compared to 91.6% in 2007.and 2007, respectively, and 89.6% and 88.6% for the six months ended June 30, 2008 and 2007, respectively. The loss ratios on creditor reinsurance business are normally lower than traditional reinsurance, while allowances are normally higher as a percentage of premiums. Loss ratios for creditor business were 40.7% in90.4% and 46.5% for the firstsecond quarter of 2008 compared to 49.7%and 2007, respectively, and 64.1% and 48.0% for the six months ended June 30, 2008 and 2007, respectively. The increases in 2007.2008 were primarily the result of the release of retroceded reserves of $10.4 million from the aforementioned recapture. Excluding creditor business and the recapture, the loss ratioratios for this segment was 93.2% inwere 97.3% and 94.8% for the firstsecond quarter of 2008 compared to 100.9% inand 2007, respectively, and 95.3% and 97.5% for the six months ended June 30, 2008 and 2007. The lower loss ratio in 2008 is primarily due to favorable mortality experience compared to the prior year. Historically, the loss ratio increased primarily as the result of several large permanent level premium in force blocks assumed in 1997 and 1998. These blocks are mature blocks of permanent level

28


premium business in which mortality as a percentage of net premiums is expected to be higher than historical ratios. The nature of permanent level premium policies requires the Company to set up actuarial liabilities and invest the amounts received in excess of early-year mortality costs to fund claims in the later years when premiums, by design, continue to be level as compared to expected increasing mortality or claim costs. Claims and other policy benefits, as a percentage of net premiums and investment income was 65.9%were 76.6% and 68.2% in the firstsecond quarter of 2008 compared to 72.4% in 2007.and 2007, respectively, and 71.2% and 70.1% for the six months ended June 30, 2008 and 2007, respectively.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 19.0% in18.3% and 17.4% for the firstsecond quarter of 2008 compared to 18.6% in 2007.and 2007, respectively, and 18.7% and 17.9% for the six months ended June 30, 2008 and 2007, respectively. Policy acquisition costs and other insurance expenses as a percentage of net premiums for creditor business were 49.3% in45.9% and 46.8% for the firstsecond quarter of 2008 compared to 44.1% in 2007.and 2007, respectively, and 47.7% and 45.6% for the six months ended June 30, 2008 and 2007, respectively. Excluding creditor business, policy acquisition costs and other insurance expenses as a percentage of net premiums were 11.6% in12.5% and 11.0% for the firstsecond quarter of 2008 compared to 12.9% in 2007.and 2007, respectively, and 12.1% and 11.9% for the six months ended June 30, 2008 and 2007, 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, significantly caused by the mix of first year coinsurance business versus yearly renewable term business. 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.
Other operating expenses increased $1.5$0.6 million, or 37.9%11.6%, inand $2.1 million, or 22.8%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. A stronger Canadian dollar resulted in an increase in other operating expenses of $0.7$0.4 million and $1.1 million in 2008.the second quarter and first six months of 2008, respectively. Other operating expenses as a percentage of net premiums were 3.9% in4.2% and 4.3% for the firstsecond quarter of 2008 compared to 4.0% in 2007.and 2007, respectively, and 4.1% and 4.2% for the six months ended June 30, 2008 and 2007, respectively.
EUROPE & SOUTH AFRICA OPERATIONS
The Europe & South Africa segment has operations in France, Germany, India, Italy, Mexico, Poland, Spain, South Africa and the United Kingdom (“UK”). The segment provides life reinsurance for a variety of products through yearly renewable term and coinsurance agreements, and reinsurance of critical illness coverage. Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and in some markets, group risks.
For the three months ended March 31, (dollars in thousands)
                        
 2008 2007 For the three months ended For the six months ended
(dollars in thousands) June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
    
Revenues:
  
Net premiums $189,196 $167,796  $185,490 $164,796 $374,686 $332,592 
Investment income, net of related expenses 7,551 5,774  8,778 7,103 16,329 12,877 
Investment related gains (losses), net 745  (224)  (131)  (630) 614  (854)
Other revenues 60 131  68  (27) 128 104 
    
Total revenues 197,552 173,477  194,205 171,242 391,757 344,719 
  
Benefits and expenses:
  
Claims and other policy benefits 158,535 114,154  144,460 128,828 302,995 242,982 
Interest credited  452   564  1,016 
Policy acquisition costs and other insurance expenses 17,230 26,060  16,026 17,129 33,256 43,189 
Other operating expenses 15,744 11,687  16,678 12,875 32,422 24,562 
    
Total benefits and expenses 191,509 152,353  177,164 159,396 368,673 311,749 
  
Income before income taxes $6,043 $21,124  $17,041 $11,846 $23,084 $32,970 
    

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Income before income taxes increased by $5.2 million, or 43.9%, and decreased by $15.1$9.9 million, or 71.4%30.0%, infor the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. The increase for the second quarter was primarily due to an increase in net premiums as well as a decrease to policy acquisition costs and other insurance expenses partially offset by a an increase in claims and other policy benefits. The six month decrease in 2008 compared to 2007 was primarily due to adverse claims experience in the first quarter of 2008, partially offset by increased net premiums and decreased policy acquisition costs and other insurance expenses in the firstsecond quarter of 2008 compared to the same period in 2007.2008. Favorable foreign currency exchange fluctuations resulted in an increase to income before income taxes totaling approximately $0.7$0.6 million and $1.3 million for the second quarter and first quartersix months of 2008.2008, respectively.
Net premiums increased $21.4grew $20.7 million, or 12.8%12.6%, inand $42.1 million, or 12.7%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. This increase wasThese increases were primarily the result of new business from both new and existing treaties. During the first quarter, several2008, there was a favorable foreign currencies,currency exchange fluctuation, particularly the British pound andfrom the euro strengthenedstrengthening against the U.S. dollar, andwhich increased net premiums by approximately $4.2 million. $0.6 million in the second quarter of 2008, and $4.8 million for the six months ended June 30, 2008, as compared to the same periods in 2007.
A significant portion of the net premiums for the segment, in each period presented, relates to reinsurance of critical illness coverage, primarily in the UK. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Net premiums earned from this coverage totaled $60.4$67.3 million and $57.9 million in the second quarter of 2008 and 2007, respectively, and $127.7 million and $114.9 million for the first quarter ofsix months ended June 30, 2008 as compared to $57.0 million for the first quarter of 2007.and 2007, respectively. Premium levels are significantly influenced by large transactions and reporting practices of ceding companies and therefore can fluctuate from period to period.
Net investment income increased $1.8$1.7 million, or 30.8%23.6%, inand $3.5 million, or 26.8%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. This increase was primarily dueThese increases can be attributed to an increasegrowth in allocated investment income.the invested asset base and increased portfolio return. Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.
Loss ratios for this segment were 83.8% in77.9% and 78.2% for the firstsecond quarter of 2008 compared to 68.0% in 2007.and 2007, respectively, and 80.9% and 73.1% for the six months ended June 30, 2008 and 2007, respectively. The increase in the loss ratio for the first quarter ofsix months ended June 30, 2008 was primarily due to unfavorable claims experience in the UK and South Africa during the first quarter, while the prior periodyear reflected favorable mortality experience.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 9.1% in8.6% and 10.4% for the firstsecond quarter of 2008 as compared to 15.5% in 2007.and 2007, respectively, and 8.9% and 13.0% for the six months ended June 30, 2008 and 2007, respectively. These percentages fluctuate due to timing of client company reporting, variations in the mixture of business being reinsured and the relative maturity of the business. In addition, as the segment grows, renewal premiums, which have lower allowances than first-year premiums, represent a greater percentage of the total net premiums.
Other operating expenses increased $4.1$3.8 million, or 34.7%29.5%, and $7.9 million, or 32.0%, for the three and six months ended June 30, 2008, as compared to the same periodperiods in 2007. Other operating expenses as a percentage of net premiums totaled 8.3% in9.0% and 7.8% for the firstsecond quarter of 2008 compared to 7.0% in 2007. This increase wasand 2007, respectively, and 8.7% and 7.4% for the six months ended June 30, 2008 and 2007, respectively. These increases were due to higher costs associated with maintaining and supporting the segment’s increase in business over the past several years and the Company’s recent expansion into central Europe. The Company believes that sustained growth in net premiums should lessen the burden of start-up expenses and expansion costs over time.
ASIA PACIFIC OPERATIONS
The Asia Pacific segment has operations in Australia, Hong Kong, Japan, Malaysia, Singapore, New Zealand, South Korea, Taiwan and mainland China. The principal types of reinsurance for this segment include life, critical illness, disability income, superannuation, and financial reinsurance. Superannuation is the Australian government mandated compulsory retirement savings program. Superannuation funds accumulate retirement funds for

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employees, and in addition, offer life and disability insurance coverage. Reinsurance agreements may be either facultative or automatic agreements covering primarily individual risks and in some markets, group risks.
For the three months ended March 31, (dollars in thousands)
                 
  For the three months ended For the six months ended
(dollars in thousands) June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
   
Revenues:
                
Net premiums $277,716  $198,971  $518,651  $385,809 
Investment income, net of related expenses  12,397   8,610   23,811   17,273 
Investment related losses, net  (1,510)  (499)  (996)  (570)
Other revenues  1,851   2,583   4,403   4,410 
         
Total revenues  290,454   209,665   545,869   406,922 
                 
Benefits and expenses:
                
Claims and other policy benefits  225,011   151,664   418,680   302,147 
Policy acquisition costs and other insurance expenses  28,386   28,173   56,467   52,787 
Other operating expenses  15,801   14,219   30,903   26,047 
         
Total benefits and expenses  269,198   194,056   506,050   380,981 
                 
Income before income taxes $21,256  $15,609  $39,819  $25,941 
   
         
  2008 2007
   
Revenues:
        
Net premiums $240,935  $186,838 
Investment income, net of related expenses  11,414   8,663 
Investment related gains (losses), net  514   (71)
Other revenues  2,552   1,827 
   
Total revenues  255,415   197,257 
         
Benefits and expenses:
        
Claims and other policy benefits  193,669   150,483 
Policy acquisition costs and other insurance expenses  28,081   24,614 
Other operating expenses  15,102   11,828 
   
Total benefits and expenses  236,852   186,925 
         
Income before income taxes $18,563  $10,332 
   

23


Income before income taxes increased by $8.2$5.6 million, or 79.7%36.2%, inand $13.9 million, or 53.5%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. Favorable results from operations throughout the segment, primarily due to increased net premiums, contributed to the increase in income before income taxes for the second quarter and first quartersix months of 2008, as compared to the same periodperiods in 2007. Favorable foreign currency exchange fluctuations resulted in an increase to income before income taxes totaling approximately $2.2 million and $4.4 million for the second quarter and first quartersix months of 2008.2008, respectively.
Net premiums grew $54.1$78.7 million, or 29.0%39.6%, inand $132.8 million, or 34.4%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. This premium growth was due to increased net premiums in all offices but primarily the result of increases in the volume of business in Korea, Australia, Japan and Korea.Taiwan. Premiums in AustraliaKorea increased by $22.8$57.4 million in the firstsecond quarter of 2008, and $64.4 million for the six months ended June 30, 2008, as compared to the same periodperiods in 2007. Premiums in JapanAustralia increased by $13.0$12.2 million in the firstsecond quarter of 2008, and $35.0 million for the six months ended June 30, 2008, as compared to the same periodperiods in 2007. Premiums in KoreaTaiwan increased by $7.0$14.2 million in the firstsecond quarter of 2008, and $16.7 million for the six months ended June 30, 2008, as compared to the same periods in 2007. Premium levels are significantly influenced by large transactions and reporting practices of ceding companies and can fluctuate from period to period.
Foreign currencies in certain significant markets, particularly the Australian and New Zealand dollars and the Japanese yen, have strengthened against the U.S. dollar during the first three months of 2008 compared to 2007. The overall effect of changes in local Asia Pacific segment currencies was an increase in net premiums of approximately $22.4$8.6 million and $31.0 million for the second quarter and first quartersix months of 2008, when compared to the same quarter in 2007.respectively.
A portion of the net premiums for the segment, in each period presented, relates to reinsurance of critical illness coverage. This coverage provides a benefit in the event of the diagnosis of a pre-defined critical illness. Reinsurance of critical illness in the Asia Pacific operations is offered primarily in South Korea, Australia and Hong Kong. Net premiums earned from this coverage totaled $35.5$71.8 million and $39.3 million in the second quarter of 2008 and 2007, respectively, and $112.3 million and $74.1 million for the first quartersix months of 2008 as compared to $34.3 million for the first quarter of 2007.and 2007, respectively.
Net investment income increased $2.8$3.8 million, or 31.8%44.0%, inand $6.5 million, or 37.9%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. This increase was primarily dueThese increases can be attributed to an increasegrowth in allocated investment income.the invested asset base and increased portfolio return. Investment income and investment related gains and losses are allocated to the various operating segments based on average assets and related capital levels deemed appropriate to support the segment business volumes. Investment performance varies with the composition of investments and the relative allocation of capital to the operating segments.

31


Other revenues increaseddecreased by $0.7 million, or 39.7%28.3%, infor the first quarter ofthree months ended June 30, 2008, as compared to the same period in 2007. Other revenue remained virtually unchanged for the first six months of 2008 and 2007. The primary source of other revenues areis fees from financial reinsurance treaties in Japan. At March 31,June 30, 2008 and 2007, the amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, was $0.6 billion and $0.7 billion.billion, respectively. 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.
Loss ratios for this segment were 80.4% in81.0% and 76.2% for the firstsecond quarter of 2008 compared to 80.5% in 2007.and 2007, respectively, and 80.7% and 78.3% for the six months ended June 30, 2008 and 2007, respectively. The slight decreaseincrease in the loss ratioratios for the first quarter of 2008 was largely due to moreless favorable mortality experience.experience in 2008 compared to 2007. Loss ratios will fluctuate due to timing of client company reporting, variations in the mixture of business being reinsured and the relative maturity of the business.
Policy acquisition costs and other insurance expenses as a percentage of net premiums were 11.7% in10.2% and 14.2% for the firstsecond quarter of 2008 as compared to 13.2% in 2007.and 2007, respectively, and 10.9% and 13.7% for the six months ended June 30, 2008 and 2007, respectively. The ratio of policy acquisition costs and other insurance expenses as a percentage of net premiums willshould generally decline as the business matures,matures; however, the percentage does fluctuate periodically due to timing of client company reporting and variations in the mixture of business being reinsured.
Other operating expenses increased $3.3$1.6 million, or 27.7%11.1%, and $4.9 million, or 18.6%, for the three and six months ended June 30, 2008, as compared to the same period onperiods in 2007. OperatingOther operating expenses as a percentage of net premiums remained stable at 6.3% intotaled 5.7% and 7.1% for the firstsecond quarter of 2008 and 2007.2007, respectively, and 6.0% and 6.8% for the six months ended June 30, 2008 and 2007, respectively. The timing of premium flows and the level of costs associated with the entrance into and development of new markets in the growing Asia Pacific segment may cause other operating expenses as a percentage of net premiums to fluctuate over periods of time.
CORPORATE AND OTHER
Corporate and Other revenues include investment income from invested assets not allocated to support segment operations and undeployed proceeds from the Company’s capital raising efforts, in addition to unallocated investment related gains and losses. Corporate expenses consist of the offset to capital charges allocated to the operating segments within the policy acquisition costs and other insurance expenses line item, unallocated overhead and executive costs, and interest expense related to debt and the $225.0 million of 5.75% Company-obligated mandatorily redeemable trust preferred securities. Additionally, Corporate and Other includes results from RGA Technology Partners, Inc., a wholly-owned subsidiary that

24


develops and markets technology solutions for the insurance industry, the Company’s Argentine privatized pension business, which is currently in run-off, the investment income and expense associated with the Company’s collateral finance facility and an insignificant amount of direct insurance operations in Argentina.
For the three months ended March 31, (dollars in thousands)
                 
  For the three months ended For the six months ended
(dollars in thousands) June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
   
Revenues:
                
Net premiums $1,396  $948  $3,282  $1,227 
Investment income, net of related expenses  19,263   22,257   41,289   44,231 
Investment related gains (losses), net  241   (1,963)  (130)  (11,815)
Other revenues  2,062   1,961   3,074   5,600 
   
Total revenues  22,962   23,203   47,515   39,243 
                 
Benefits and expenses:
                
Claims and other policy benefits  35   113   37   28 
Policy acquisition costs and other insurance expenses  (11,233)  (9,187)  (21,206)  (19,223)
Other operating expenses  8,891   9,998   19,721   23,456 
Interest expense  21,580   23,232   44,674   43,685 
Collateral finance facility expense  6,966   13,206   14,440   25,893 
   
Total benefits and expenses  26,239   37,362   57,666   73,839 
                 
Loss before income taxes $(3,277) $(14,159) $(10,151) $(34,596)
   

32


         
  2008 2007
   
Revenues:
        
Net premiums $1,886  $279 
Investment income, net of related expenses  22,026   21,974 
Investment related losses, net  (371)  (9,852)
Other revenues  1,012   3,639 
   
Total revenues  24,553   16,040 
         
Benefits and expenses:
        
Claims and other policy benefits  2   (85)
Policy acquisition costs and other insurance expenses  (9,973)  (10,036)
Other operating expenses  10,830   13,458 
Interest expense  23,094   20,453 
Collateral finance facility expense  7,474   12,687 
   
Total benefits and expenses  31,427   36,477 
         
Loss before income taxes $(6,874) $(20,437)
   
Loss before income taxes decreased $13.6by $10.9 million, or 66.4%76.9%, inand $24.4 million, or 70.7%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. ThisThe decrease for the second quarter is primarily due to a $9.5$6.2 million decrease in collateral finance facility expense, a $2.0 million decrease in policy acquisition costs and other insurance expenses and a $1.7 million decrease in interest expense. The decrease for the first six months is primarily due to an $11.7 million decrease in investment related losses, net, a $5.2and an $11.5 million decrease in collateral finance facility expense and a $2.6 million decrease in other operating expenses, offset by a $2.6 million decrease in other income and a $2.6 million increase in interest expense.
Total revenues increased $8.5decreased by $0.2 million, or 53.1%1.0%, inand increased $8.3 million, or 21.1%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. This increaseThe decrease for the second quarter was due to a $9.5$3.0 million decrease in net investment income largely due to lower investment returns on variable investments used to fund the Company’s collateral finance facility, somewhat offset by a $2.2 million increase in investment related gains. The increase for the six month period was due to an $11.7 million decrease in investment related losses, net, primarily due to the recognition of a $10.5 million currency translation loss in the first quarter of 2007 related to the Company’s decision to sell its direct insurance operations in Argentina. This increase was partially offset by a $2.6$2.5 million decrease in other income primarily due to lower returns ona decrease in the value of company owned life insurance policies.policies and a $2.9 million decrease in net investment income for the same reason as noted above for the second quarter. In 2008, investment income increased due to a larger invested asset base and higher effective investment portfolio yield, which was offset by an increase in the amount allocated to the operating segments to support their growing asset levels.
Total benefits and expenses decreased $5.1by $11.1 million, or 13.8%29.8%, inand $16.2 million, or 21.9%, for the first quarter ofthree and six months ended June 30, 2008, as compared to the same periodperiods in 2007. ThisThe decrease for the second quarter was primarily due to a $5.2$6.2 million decrease in collateral finance facility expense due to substantially reduced variable interest rates in the current quarter. Otheryear. Policy acquisition costs and other insurance expenses also decreased $2.0 million in the second quarter, primarily due to increased charges to the operating segments for the use of capital. Also contributing to the decrease for the second quarter was a decrease in interest expense of $1.7 million, primarily due to interest provisions for income taxes related to FIN 48, and decreased other operating expenses of $1.1 million, primarily related to a decrease in equity based compensation. The decrease for the six month period was primarily due to an $11.5 million decrease in collateral finance facility expense due to substantially reduced variable interest rates in the current year. Additionally, other operating expenses decreased $2.6$3.7 million in 2008 primarily related to a decrease in equity based compensation but was offset by a $2.6compensation; policy acquisition costs and other insurance expenses decreased $2.0 million, increase inprimarily due to increased charges to the operating segments for the use of capital; and interest expense decreased $1.0 million, primarily due to the issuance of $300.0 million in senior notes in March 2007.lower interest provisions for income taxes related to FIN 48.
Discontinued Operations
The discontinued accident and health operations reported a loss,losses, net of taxes, of $5.1$0.1 million and $1.6 million in the second quarter of 2008 and 2007, respectively, and $5.2 million and $2.2 million for the first quartersix months of 2008 compared to aand 2007, respectively. The increased loss net of taxes, of $0.7 million for the first quarter of 2007. The loss in the first quartersix months of 2008 was due to the settlement of a disputed claim in which the Company paid $5.8 million in excess of the amount held in reserve.reserve in the first quarter of 2008. The calculation of the claim reserve liability for the entire portfolio of accident and health business requires management to make estimates and assumptions that affect the reported claim reserve levels. Due to the uncertaintyAs of June 30, 2008, there are no arbitrations or claims disputes associated with the Company’s discontinued accident and health operations, and the remaining run-offrunoff activity of this business future claims settlements and other expenses, net income in future periods could be affected positively or negatively.is not significant.
Liquidity and Capital Resources
The Holding Company
RGA is a holding company whose primary uses of liquidity include, but are not limited to, the immediate capital needs of its operating companies associated with the Company’s primary businesses, dividends paid by RGA to its shareholders, interest payments on its indebtedness, and repurchases of RGA common stock under a plan approved by the board of directors. 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 two operating subsidiaries, and dividends from operating

25


subsidiaries. As the Company continues its expansion efforts, RGA will continue to be dependent on these sources of liquidity.

33


The Company believes that it has sufficient liquidity to fund its cash needs under various scenarios that include the potential risk of the early recapture of a reinsurance treaty by the ceding company and significantly higher than expected death claims. Historically, the Company has generated positive net cash flows from operations. However, in the event of significant unanticipated cash requirements beyond normal liquidity, the Company has multiple liquidity alternatives available based on market conditions and the amount and timing of the liquidity need. These options include borrowings under committed credit facilities, secured borrowings, the ability to issue long-term debt, capital securities or common equity and, if necessary, the sale of invested assets.
Cash Flows
The Company’s net cash flows provided by operating activities for the periods ended March 31,June 30, 2008 and 2007 were $188.5$366.3 million and $285.1$515.5 million, respectively. Cash flows from operating activities are affected by the timing of premiums received, claims paid, and working capital changes. The $96.6$149.2 million net decrease in operating cash flows during the threesix months of 2008 compared to the same period in 2007 was primarily a result of cash outflows related to claims, acquisition costs, income taxes and other operating expenses increasing more than cash inflows related to premiums and investment income. Cash from premiums and investment income increased $84.5$189.1 million and decreased $19.2$37.7 million, respectively, but was more than offset in total by higher operating cash outlays of $161.9$300.6 million for the current threesix month period. The Company believes the short-term cash requirements of its business operations will be sufficiently met by the positive cash flows generated. Additionally, the Company believes it maintains a high quality fixed maturity portfolio that is saleable,can be sold, if necessary, to meet the Company’s short- and long-term obligations.
Net cash used in investing activities was $246.3$610.0 million and $382.4$443.3 million in the first threesix months of 2008 and the comparable prior-year period, respectively. This decreaseincrease is largely related to the investment of a large deposit of approximately $340.9 million received on an investment type contract in 2008 largely offset by the investment in 2007 of $295.3 million of the net proceeds from the Company’s issuance of senior notes in March 2007.notes. The sales and purchases of fixed maturity securities are related to the management of the Company’s investment portfolios and the investment of excess cash generated by operating and financing activities.
Net cash used in financing activities was $42.5 million in the first three months of 2008 and net cash provided by financing activities was $251.3$200.8 million and $179.5 million in the same periodfirst six months of 2007.2008 and 2007, respectively. Changes in cash provided by (used in) financing activities primarily relate to the issuance of equity or debt securities, borrowings or payments under the Company’s existing credit agreements, treasury stock activity and excess deposits (payments) under investment-type contracts.
Debt and Preferred Securities
As of March 31,June 30, 2008 and December 31, 2007, the Company had $925.9$926.1 million and $925.8 million, respectively, in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements.
The Company maintains three revolving credit facilities. The largest is a syndicated credit facility with an overall capacity of $750.0 million that expires in September 2012. The Company may borrow cash and may obtain letters of credit in multiple currencies under this facility. As of March 31,June 30, 2008, the Company had no cash borrowings outstanding and $358.0$426.6 million in issued, but undrawn, letters of credit under this facility. The Company’s other credit facilities consist of a £15.0 million credit facility that expires in May 2009,2010, with an outstanding balance of $29.8$29.9 million as of March 31,June 30, 2008, and an A$50.0 million Australian credit facility that expires in March 2011, with no outstanding balance as of March 31,June 30, 2008.
As of March 31,June 30, 2008, the average interest rate on all long-term and short-term debt outstanding, excluding the Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures of the Company (“Trust Preferred Securities”), was 6.37%. Interest is expensed on the face amount, or $225 million, of the Trust Preferred Securities at a rate of 5.75%.
Collateral Finance Facility
In June 2006, RGA’s subsidiary, Timberlake Financial, L.L.C. (“Timberlake Financial”), issued $850.0 million of Series A Floating Rate Insured Notes due June 2036 in a private placement. The notes were issued to fund the collateral requirements for statutory reserves required by the U.S. Valuation of Life Policies Model Regulation (commonly referred to as Regulation XXX) on specified term life insurance policies reinsured by RGA Reinsurance

34


Company (“RGA Reinsurance”). Proceeds from the notes, along with a $112.8 million direct investment by the Company, have been deposited into a series of trust accounts that collateralize the notes and are not available to satisfy the general obligations of the Company. Interest on the

26


notes will accrue at an annual rate of 1-month LIBOR plus a base rate margin, payable monthly. The payment of interest and principal on the notes is insured by a monoline insurance company through a financial guaranty insurance policy. The notes represent senior, secured indebtedness of Timberlake Financial without legal recourse to RGA or its other subsidiaries. Timberlake Financial will rely primarily upon the receipt of interest and principal payments on a surplus note and dividend payments from its wholly-owned subsidiary, Timberlake Reinsurance Company II (“Timberlake Re”), a South Carolina captive insurance company, to make payments of interest and principal on the notes. The ability of Timberlake Re to make interest and principal payments on the surplus note and dividend payments to Timberlake Financial is contingent upon South Carolina regulatory approval and the performance of specified term life insurance policies with guaranteed level premiums retroceded by RGA’s subsidiary, RGA Reinsurance, to Timberlake Re.
Asset / Liability Management
The Company actively manages its cash and invested assets using an approach that is intended to balance quality, diversification, asset/liability matching, liquidity and investment return. The goals of the investment process are to optimize after-tax, risk-adjusted investment income and after-tax, risk-adjusted total return while managing the assets and liabilities on a cash flow and duration basis.
The Company has established target asset portfolios for each major insurance product, which represent the investment strategies intended to profitably fund its liabilities within acceptable risk parameters. These strategies include objectives for effective duration, yield curve sensitivity and convexity, liquidity, asset sector concentration and credit quality.
The Company’s liquidity position (cash and cash equivalents and short-term investments) was $350.4$409.8 million and $479.4 million at March 31,June 30, 2008 and December 31, 2007, respectively. The decrease in the Company’s liquidity position from December 31, 2007 is primarily due to the timing of firstsecond quarter investment activity. Liquidity needs are determined from valuation analyses conducted by operational units and are driven by product portfolios. Periodic evaluations of demand liabilities and short-term liquid assets are designed to adjust specific portfolios, as well as their durations and maturities, in response to anticipated liquidity needs.
The Company has entered into sales of investment securities under agreements to repurchase the same securities. These arrangements are used for purposes of short-term financing. There were no securities subject to these agreements outstanding at June 30, 2008. At March 31, 2008 and December 31, 2007, respectively, the book value of securities subject to these agreements, and included in fixed maturity securities was $62.0 million and $30.1 million, while the repurchase obligations of $62.0 million and $30.1 million were reported in other liabilities in the consolidated statement of financial position. The Company also occasionally enters into arrangements to purchase securities under agreements to resell the same securities. Amounts outstanding, if any, are reported in cash and cash equivalents. These agreements are primarily used as yield enhancement alternatives to other cash equivalent investments. There were no agreements outstanding at March 31,June 30, 2008 and December 31, 2007. Further, the Company often enters into securities lending agreements whereby certain securities are loaned to third parties, primarily major brokerage firms, in order to earn additional yield. The Company requires a minimum of 102% of the fair value of the loaned securities as collateral in the form of either cash or securities held by the Company or a trust. The cash collateral is reported in cash and the offsetting collateral re-paymentrepayment obligation is reported in other liabilities. The Company had securities lending agreements outstanding of $21.3$12.8 million at March 31,June 30, 2008. There were no securities lending agreements outstanding at December 31, 2007.
RGA Reinsurance is a member of the Federal Home Loan Bank of Des Moines (“FHLB”) and holds $11.8$10.1 million of common stock of the FHLB, which is included in other invested assets on the Company’s condensed consolidated balance sheets. RGA Reinsurance occasionally enters into funding agreements with the FHLB but had no outstanding funding agreements with the FHLB at March 31,June 30, 2008 and December 31, 2007.
Future Liquidity and Capital Needs
Based on the historic cash flows and the current financial results of the Company, subject to any dividend limitations which may be imposed by various insurance regulations, management believes RGA’s cash flows from operating activities, together with undeployed proceeds from its capital raising efforts, including interest and investment income on those proceeds, interest income received on surplus notes with two operating subsidiaries,

35


and its ability to raise funds in the capital markets, will be sufficient to enable RGA to make dividend payments to its shareholders, to make interest payments on its senior indebtedness, trust preferred securitiesTrust Preferred Securities and junior subordinated notes, repurchase RGA common stock under the board of director approved plan and meet its other obligations.
A general economic downturn or a downturn in the equity and other capital markets could adversely affect the market for many annuity and life insurance products. Because the Company obtains substantially all of its revenues through reinsurance

27


arrangements that cover a portfolio of life insurance products, as well as annuities, its business wouldcould be harmed if the market for annuities or life insurance were adversely affected.
Investments
The Company had total cash and invested assets of $16.6$17.2 billion and $16.8 billion at March 31,June 30, 2008 and December 31, 2007, respectively, as illustrated below (dollars in thousands):
                
 March 31, 2008 December 31, 2007 June 30, 2008 December 31, 2007
Fixed maturity securities, available-for-sale $9,387,094 $9,397,916  $9,667,961 $9,397,916 
Mortgage loans on real estate 812,539 831,557  798,896 831,557 
Policy loans 1,039,464 1,059,439  1,048,517 1,059,439 
Funds withheld at interest 4,650,948 4,749,496  4,825,297 4,749,496 
Short-term investments 46,336 75,062  47,081 75,062 
Other invested assets 389,437 284,220  418,864 284,220 
Cash and cash equivalents 304,083 404,351  362,689 404,351 
    
Total cash and invested assets $16,629,901 $16,802,041  $17,169,305 $16,802,041 
    
The following table presents consolidated invested assets, net investment income and investment yield, excluding funds withheld. Funds withheld assets are primarily associated with the reinsurance of annuity contracts on which the Company earns a spread. Fluctuations in the yield on funds withheld assets are generally offset by a corresponding adjustment to the interest credited on the liabilities (dollars in thousands).
                                    
 March 31, Three months ended June 30, Six months ended June 30,
 Increase/ Increase/ Increase/
 2008 2007 (Decrease) 2008 2007 (Decrease) 2008 2007 (Decrease)
Average invested assets at amortized cost $11,539,433 $10,252,317  12.6% $11,696,386 $10,835,183  7.9% $11,531,787 $10,467,466  10.2%
Net investment income 170,899 148,820  14.8% 173,587 156,317  11.0% 344,487 305,137  12.9%
 
Investment yield (ratio of net investment income to average invested assets)  6.06%  5.93% 13 bps  6.07%  5.90% 17 bps  6.06%  5.92% 14 bps
Investment yield increased for the three months and six months ended June 30, 2008, as the current economic environment allowed the Company to invest in securities with higher spreads than those already held in the portfolio. In addition, new mandates with longer duration targets allowed the Company to invest in securities with longer maturities than what was held in the portfolio, which, in a positive yield curve environment, has also contributed to the increase in the average yield of the portfolio.
All investments held by RGA and its subsidiaries are monitored for conformance to the qualitative and quantitative limits prescribed by the applicable jurisdiction’s insurance laws and regulations. In addition, the operating companies’ boards of directors periodically review their respective investment portfolios. The Company’s investment strategy is to maintain a predominantly investment-grade, fixed maturity portfolio, to provide adequate liquidity for expected reinsurance obligations, and to maximize total return through prudent asset management. The Company’s asset/liability duration matching differs between operating segments. Based on Canadian reserve requirements, a portion of the Canadian liabilities is strictlyare matched with long-duration Canadian assets, with the remaining assets invested to maximize the total rate of return, given the characteristics of the corresponding liabilities and Company liquidity needs.assets. The duration of the Canadian portfolio exceeds twenty years. The duration for all the Company’s portfolios, when consolidated, rangeranges between eight and ten years. See Note 4 – “Investments” in the Notes to Consolidated Financial Statements of the 2007 Annual Report for additional information regarding the Company’s investments.

36


The Company’s fixed maturity securities are invested primarily in commercial and industrial bonds, public utilities, U.S. and Canadian government securities, as well as mortgage- and asset-backed securities. As of March 31,June 30, 2008 and December 31, 2007, approximately 97.1%96.7% and 97.2%, respectively, of the Company’s consolidated investment portfolio of fixed maturity securities was investment grade. Important factors in the selection of investments include diversification, quality, yield, total rate of return potential and call protection. The relative importance of these factors is determined by market conditions and the underlying product or portfolio characteristics. Cash equivalents are invested in high-grade money market instruments. The largest asset class in which fixed maturities were invested was in corporate securities, including commercial, industrial, finance and utility bonds, which represented approximately 46.8%46.7% of fixed maturity securities as of March 31,June 30, 2008, compared to 46.5% at December 31, 2007. Corporate securities are diversified by sector, with the majority in finance,

28


commercial and industrial bonds. During the second quarter, the Company increased its allocation to the financial sector. The average Standard & Poor’s (“S&P”) rating of the Company’s corporate securities was “A- at March 31,June 30, 2008 and December 31, 2007.
The fair valueNational Association of publicly traded fixed maturity securities are based upon quoted market prices or estimates from independent pricing services with oversight from the Company. Private placement fixed maturity securities fair values are based on the credit quality and duration of marketable securities deemed comparable by the Company’s investment advisor, which may be of another issuer. The NAICInsurance Commissioners (“NAIC”) assigns securities quality ratings and uniform valuations called “NAIC Designations” which are used by insurers when preparing their annual statements. The NAIC assigns designations to publicly traded as well as privately placed securities. The designations assigned by the NAIC range from class 1 to class 6, with designations in classes 1 and 2 generally considered investment grade (BBB or higher rating agency designation). NAIC designations in classes 3 through 6 are generally considered below investment grade (BB or lower rating agency designation).
As of March 31,June 30, 2008, the Company classified approximately 16.1%15.5% of its fixed maturity securities in the Level 3 category in accordance with SFAS 157 (refer to Note 5 – “Fair Value Disclosures” in the Notes to Condensed Consolidated Financial Statements for additional information). These securities primarily consist of private placement corporate securities with an inactive trading market and securities for which the Company relies on broker quotes to determine fair value.market. Additionally, the Company has included asset-backed securities with subprime exposure in the Level 3 category due to the current market uncertainty associated with these securities.
The quality of the Company’s available-for-sale fixed maturity securities portfolio, as measured at fair value and by the percentage of fixed maturity securities invested in various ratings categories, relative to the entire available-for-sale fixed maturity security portfolio, at March 31,June 30, 2008 and December 31, 2007 was as follows (dollars in thousands):
                                                      
 March 31, 2008 December 31, 2007 June 30, 2008 December 31, 2007
NAICNAIC Rating Agency Amortized Estimated % of Amortized Estimated % of Rating Agency Amortized Estimated % of Amortized Estimated % of
DesignationDesignation Designation Cost Fair Value Total Cost Fair Value Total Designation Cost Fair Value Total Cost Fair Value Total
1 AAA/AA/A $7,441,391  $7,615,888   78.8% $7,022,497  $7,521,177   80.0%
2 BBB  1,812,894   1,730,612   17.9%  1,628,431   1,617,983   17.2%
3 BB  267,856   253,695   2.6%  201,868   198,487   2.1%
4 B  51,320   46,722   0.5%  47,013   43,680   0.5%
5 CCC and lower  18,375   17,250   0.2%  16,800   16,502   0.2%
6 In or near default  3,074   3,794   %  83   87   %
1  AAA/AA/A $7,127,035 $7,436,088  79.2% $7,022,497 $7,521,177  80.0%    
2  BBB 1,725,432 1,676,870  17.8% 1,628,431 1,617,983  17.2% Total $9,594,910  $9,667,961   100.0% $8,916,692  $9,397,916   100.0%
3  BB 222,209 214,105  2.3% 201,868 198,487  2.1%    
4  B 48,225 43,989  0.5% 47,013 43,680  0.5%
5  CCC and lower 16,860 15,987  0.2% 16,800 16,502  0.2%
6  In or near default 53 55  83 87  
      
   Total $9,139,814 $9,387,094  100.0% $8,916,692 $9,397,916  100.0%
      
Within the fixed maturity security portfolio, the Company held approximately $1.3 billion and $1.4 billion in residential mortgage-backed securities at March 31,June 30, 2008 and December 31, 2007, respectively, which include agency-issued pass-through securities, collateralized mortgage obligations guaranteed or otherwise supported by the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, or the Government National Mortgage Association. As of March 31,June 30, 2008 and December 31, 2007, almost all of these securities were investment-grade. Additionally, the Company held $686.7$842.1 million and $645.2 million in investment-grade commercial mortgage-backed securities at March 31,June 30, 2008 and December 31, 2007, respectively. During 2008, the Company has significantly increased its exposure to investment-grade commercial mortgage-backed securities. Based on the Company’s analysis of this market and the current economic environment, commercial mortgage-backed securities offer value with significant returns relative to the amount of risk. The principal risks inherent in holding mortgage-backed securities are prepayment and extension risks, which will affect the timing of when cash will be received and are dependent on the level of mortgage interest rates. Prepayment risk is the unexpected increase in principal payments, primarily as a result of owner refinancing. Extension risk relates to the unexpected slowdown in

37


principal payments. In addition, mortgage-backed securities face default risk should the borrower be unable to pay the contractual interest or principal on their obligation. The Company monitors its mortgage-backed securities to mitigate exposure to the cash flow uncertainties associated with these risks.
Within the fixed maturity security portfolio, the Company held approximately $446.0$452.3 million and $464.3 million in asset-backed securities at March 31,June 30, 2008 and December 31, 2007, respectively, which include credit card and automobile receivables, subprime and Alt-A securities, home equity loans, manufactured housing bonds and collateralized bonddebt obligations. The Company’s asset-backed securities are diversified by issuer and contain both floating and fixed rate securities. The Company owns floating rate securities that represent approximately 19.8%20.7% and 19.2% of the total fixed maturity securities at March 31,June 30, 2008 and December 31, 2007, respectively. These investments have a higher degree of income variability than the other fixed income

29


holdings in the portfolio due to the floating rate nature of the interest payments. The Company holds these investments to match specific floating rate liabilities primarily reflected in the condensed consolidated balance sheets as collateral finance facility. In addition to the risks associated with floating rate securities, principal risks in holding asset-backed securities are structural, credit and capital market risks. Structural risks include the securities’ priority in the issuer’s capital structure, the adequacy of and ability to realize proceeds from collateral, and the potential for prepayments. Credit risks include consumer or corporate credits such as credit card holders, equipment lessees, and corporate obligors. Capital market risks include general level of interest rates and the liquidity for these securities in the marketplace.
As of March 31,June 30, 2008 and December 31, 2007, the Company held investments in securities with subprime mortgage exposure with amortized costs totaling $255.4$256.8 million and $267.7 million, and estimated fair values of $221.6$219.8 million and $246.8 million, respectively. Those amounts include exposure to subprime mortgages through securities held directly in the Company’s investment portfolios within asset-backed securities, as well as securities backing the Company’s funds withheld at interest investment. The securities are highly rated with weighted average S&P credit ratings of approximately “AA-” at June 30, 2008 and “AA+” at March 31, 2008 and December 31, 2007. Additionally, the Company has largely avoided investing in securities originated in the second half of 2005 and beyond, which management believes was a period of lessened underwriting quality. The majority of the Company’s holdings are originations from 2005 and prior periods. In light of the high credit quality of the portfolio, the Company does not expect to realize any material losses despite the recent increase in default rates and market concern over future performance of this asset class. Additionally, the recent series of rating agency downgrades of securities in this sector did not significantly affect the Company’s exposure as the Company experienced only one downgradesix downgrades within its portfolio of securities. The following tables summarize the securities by rating and underwriting year at March 31,June 30, 2008 and December 31, 2007 (dollars in thousands):
                                                
 March 31, 2008 June 30,2008 
 AAA AA A AAA AA A 
 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value 
2003 & Prior $16,021 $16,258 $1,487 $1,396 $3,684 $3,272  $10,578 $10,453 $1,348 $1,240 $8,892 $8,345 
2004 15,262 13,175 33,731 27,870 16,147 14,687    40,289 30,624 13,561 11,844 
2005 52,295 47,580 52,680 46,487 21,595 15,846  49,900 45,229 56,301 49,124 7,954 6,908 
2006 13,718 11,371      3,872 2,828 4,998 3,100 4,500 3,752 
2007 11,436 9,885   10,501 8,332  2,070 2,047   11,390 8,718 
    
Total $108,732 $98,269 $87,898 $75,753 $51,927 $42,137  $66,420 $60,557 $102,936 $84,088 $46,297 $39,567 
    
 BBB Below Investment Grade Total
 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
2003 & Prior $1,188 $1,052 $ $ $22,380 $21,978 
2004     65,140 55,732 
2005 2,555 1,269   129,125 111,182 
2006 3,137 3,146   16,855 14,517 
2007     21,937 18,217 
  
Total $6,880 $5,467 $ $ $255,437 $221,626 
  
                         
  BBB  Below Investment Grade  Total 
  Amortized Cost  Fair Value  Amortized Cost  Fair Value  Amortized Cost  Fair Value 
2003 & Prior $1,188  $1,058  $  $  $22,006  $21,096 
2004        11,118   10,253   64,968   52,721 
2005  2,573   2,205   15,083   12,189   131,811   115,655 
2006  3,182   3,233         16,552   12,913 
2007        8,034   6,671   21,494   17,436 
   
Total $6,943  $6,496  $34,235  $29,113  $256,831  $219,821 
   

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 December 31, 2007 December 31, 2007 
 AAA AA A AAA AA A 
 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value 
2003 & Prior $16,520 $16,531 $2,111 $1,910 $3,749 $3,246  $16,520 $16,531 $2,111 $1,910 $3,749 $3,246 
2004 26,520 26,286 33,757 31,465 16,151 14,614  26,520 26,286 33,757 31,465 16,151 14,614 
2005 41,638 40,190 60,233 55,041 21,593 18,140  41,638 40,190 60,233 55,041 21,593 18,140 
2006 13,964 11,957 5,002 3,763    13,964 11,957 5,002 3,763   
2007 20,274 18,351      20,274 18,351     
    
Total $118,916 $113,315 $101,103 $92,179 $41,493 $36,000  $118,916 $113,315 $101,103 $92,179 $41,493 $36,000 
    
 BBB Below Investment Grade Total
 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
2003 & Prior $1,186 $1,046 $ $ $23,566 $22,733 
2004     76,428 72,365 
2005 5,026 4,250   128,490 117,621 
2006     18,966 15,720 
2007     20,274 18,351 
  
Total $6,212 $5,296 $ $ $267,724 $246,790 
  
                         
  BBB  Below Investment Grade  Total 
  Amortized Cost  Fair Value  Amortized Cost  Fair Value  Amortized Cost  Fair Value 
2003 & Prior $1,186  $1,046  $  $  $23,566  $22,733 
2004              76,428   72,365 
2005  5,026   4,250         128,490   117,621 
2006              18,966   15,720 
2007              20,274   18,351 
   
Total $6,212  $5,296  $  $  $267,724  $246,790 
   
In addition to subprime mortgage exposure, at June 30, 2008, the Company held approximately $116.8 million in amortized cost of “Alt-A” mortgage securities, 89.5% of which were rated “AA” or better. This amount includes securities directly held by the Company and securities backing the Company’s funds withheld at interest investment. The Company’s fixed maturity and funds withheld portfolios include approximately $655.6$640.2 million in amortized cost of securities that are insured by various financial guarantors, or less than five percent of consolidated investments. The securities are diversified between municipal bonds and asset-backed securities with well diversified collateral pools. The Company invests in insured collateralized debt obligation (“CDO”) structures backing subprime investments of approximately $0.7$0.8 million at March 31,June 30, 2008. The insured securities are primarily investment grade without the benefit of the insurance provided by the financial guarantor and therefore the Company does not expect to incur significant realized losses as a result of the recent financial difficulties encountered by several of the financial guarantors. In addition to the insured securities, the Company held investment-grade securities issued by four of the financial guarantors totaling $21.9$19.1 million in amortized cost.
The Company does not invest in the common equity securities of Fannie Mae and Freddie Mac, both government sponsored entities; however, as of June  30, 2008, the Company holds in its general portfolio a book value of $17.5 million in direct exposure in the form of senior unsecured and preferred securities. Additionally, as of June  30, 2008, the portfolios held by the Company’s ceding companies that support its funds withheld asset contain about $403.8 million in amortized cost of direct unsecured holdings and no equity exposure. As of June  30, 2008, indirect exposure in the form of secured, structured mortgaged securities issued by Fannie Mae and Freddie Mac totals about $1.1 billion in amortized cost across the Company’s general and funds withheld portfolios. Including the funds withheld portfolios, the Company’s direct holdings in the form of preferred securities total a book value of $22.8 million as of June  30, 2008. The Company believes the probability of default by these entities on their debt and preferred obligations is very low.
The Company monitors its fixed maturity securities to determine impairments in value and evaluates factors such as financial condition of the issuer, payment performance, the length of time and the extent to which the market value has been below amortized cost, compliance with covenants, general market conditions and industry sector, current intent and ability to hold securities and various other subjective factors. Based on management’s judgment, securities determined to have an other-than-temporary impairment in value are written down to fair value. The Company recorded $5.2$5.7 million in other-than-temporary write-downs on fixed maturity securities for the threesix months ended March 31,June 30, 2008. The Company recorded $0.6$1.9 million in other-than-temporary write-downs on fixed maturity securities for the threesix months ended March 31,June 30, 2007. During the three months ended March 31,June 30, 2008 and 2007, the Company sold fixed maturity securities and equity securities with fair values of $141.3$250.6 million and $238.8$390.1 million

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at losses of $5.4 million and $12.3 million, respectively, or at 97.9% and 96.9% of book value, respectively. During the six months ended June 30, 2008 and 2007, the Company sold fixed maturity securities and equity securities with fair values of $391.9 million and $629.0 million at losses of $8.9$14.3 million and $6.1$18.4 million, respectively, or at 94.1%96.5% and 97.5%97.2% of book value, respectively. Generally, such losses are insignificant in relation to the cost basis of the investment and are largely due to changes in interest rates from the time the security was purchased. The securities are classified as available-for-sale in order to meet the Company’s operational and other cash flow requirements. The Company does not engage in short-term buying and selling of securities to generate gains or losses.
The following table presents the total gross unrealized losses for 1,2901,618 and 1,105 fixed maturity securities and equity securities as of March 31,June 30, 2008 and December 31, 2007, respectively, where the estimated fair value had declined and remained below amortized cost by the indicated amount (dollars in thousands):

31


                        
 March 31, 2008 December 31, 2007                        
   Gross   Gross   June 30, 2008 December 31, 2007
 Number of Unrealized Number of Unrealized   Gross Gross  
 Securities Loss % of Total Securities Loss % of Total Number of Unrealized Number of Unrealized  
   Securities Losses % of Total Securities Losses % of Total
Less than 20% 1,143 $230,125  62.0% 1,039 $159,563  80.5% 1,431 $325,912  67.0% 1,039 $159,563  80.5%
20% or more for less than six months 133 130,954 35.3 59 35,671 18.0  149 119,495  24.5% 59 35,671 18.0 
20% or more for six months or greater 14 10,222 2.7 7 2,981 1.5  38 41,265  8.5% 7 2,981 1.5 
    
Total 1,290 $371,301  100.0% 1,105 $198,215  100.0% 1,618 $486,672  100.0% 1,105 $198,215  100.0%
    
While all of these securities are monitored for potential impairment, the Company’s experience indicates that the first two categories do not present as great a risk of impairment, and often, fair values recover over time. These securities have generally been adversely affected by overall economic conditions, primarily an increase in the interest rate environment, including a widening of credit default spreads.
The following tables present the estimated fair values and gross unrealized losses for the 1,2901,618 and 1,105 fixed maturity securities and equity securities that have estimated fair values below amortized cost as of March 31,June 30, 2008 and December 31, 2007, respectively. These investments are presented by class and grade of security, as well as the length of time the related market value has remained below amortized cost.
                                                
 As of March 31, 2008 As of June 30, 2008
 Equal to or greater than   Equal to or greater than  
 Less than 12 months 12 months Total Less than 12 months 12 months Total
 Gross Gross Gross   Gross Gross Gross
 Estimated Fair Unrealized Estimated Unrealized Estimated Fair Unrealized Estimated Unrealized Estimated Unrealized Estimated Unrealized
(dollars in thousands) Value Loss Fair Value Loss Value Loss Fair Value Losses Fair Value Losses Fair Value Losses
Investment grade securities:
  
U.S. corporate securities
 $1,364,148 $105,669 $506,480 $47,912 $1,870,628 $153,581  $2,000,333 $134,633 $501,405 $76,540 $2,501,738 $211,173 
Canadian and Canadian provincial governments
 144,448 2,924 25,089 1,258 169,537 4,182  150,207 2,725 61,561 2,944 211,768 5,669 
Residential mortgage-backed securities
 389,755 16,616 167,342 10,276 557,097 26,892  632,964 19,504 239,712 17,541 872,676 37,045 
Foreign corporate securities
 396,425 34,494 171,394 11,633 567,819 46,127  517,394 28,215 198,791 23,943 716,185 52,158 
Asset-backed securities
 271,240 37,976 93,824 12,040 365,064 50,016  173,836 20,577 205,431 33,751 379,267 54,328 
Commercial mortgage-backed securities
 473,862 40,214 44,599 3,111 518,461 43,325  588,484 47,771 42,374 3,824 630,858 51,595 
State and political subdivisions
 25,820 2,035 11,554 3,302 37,374 5,337  28,543 3,577 7,400 2,620 35,943 6,197 
Other foreign government securities
 95,418 1,321 57,301 1,765 152,719 3,086  296,507 7,181 64,786 2,948 361,293 10,129 
            
Investment grade securities
 $3,161,116 241,249 1,077,583 91,297 4,238,699 332,546  4,388,268 264,183 1,321,460 164,111 5,709,728 428,294 
            
 
Non-investment grade securities:
 
U.S. corporate securities
 131,232 12,660 34,045 2,228 165,277 14,888 
Asset-backed securities
 1,330 2   1,330 2 
Foreign corporate securities
 10,051 1,885 3,420 237 13,471 2,122 
      
Non-investment grade securities
 142,613 14,547 37,465 2,465 180,078 17,012 
      
Total fixed maturity securities
 $3,303,729 $255,796 $1,115,048 $93,762 $4,418,777 $349,558 
      
Equity securities
 $124,771 $20,286 $7,061 $1,457 $131,832 $21,743 
      
Total number of securities in an unrealized loss position
 912 378 1,290 
       

3240


                         
  As of December 31, 2007
          Equal to or greater than    
  Less than 12 months 12 months Total
      Gross     Gross   Gross
  Estimated Unrealized Estimated Unrealized Estimated Unrealized
(dollars in thousands) Fair Value Loss Fair Value Loss Fair Value Loss
Investment grade securities:
                        
U.S. corporate securities
 $1,185,664  $63,368  $487,626  $25,541  $1,673,290  $88,909 
Canadian and Canadian provincial governments
  78,045   1,077   4,313   86   82,358   1,163 
Residential mortgage-backed securities
  299,655   5,473   348,632   6,743   648,287   12,216 
Foreign corporate securities
  293,783   17,880   155,445   5,995   449,228   23,875 
Asset-backed securities
  341,337   24,958   72,445   5,722   413,782   30,680 
Commercial mortgage-backed securities
  110,097   4,499   46,647   588   156,744   5,087 
U.S. government and agencies
  700   1         700   1 
State and political subdivisions
  27,265   605   14,518   339   41,783   944 
Other foreign government securities
  127,397   1,635   75,354   2,878   202,751   4,513 
       
Investment grade securities
  2,463,943   119,496   1,204,980   47,892   3,668,923   167,388 
       
                         
Non-investment grade securities:
                        
U.S. corporate securities
  106,842   6,044   30,105   1,727   136,947   7,771 
Asset-backed securities
  1,996   776         1,996   776 
Foreign corporate securities
  9,692   1,930   3,524   165   13,216   2,095 
       
Non-investment grade securities
  118,530   8,750   33,629   1,892   152,159   10,642 
       
Total fixed maturity securities
 $2,582,473  $128,246  $1,238,609  $49,784  $3,821,082  $178,030 
       
Equity securities
 $83,166  $16,764  $19,073  $3,421  $102,239  $20,185 
       
Total number of securities in an unrealized loss position
  691       414       1,105     
                         
Continued
                         
  As of June 30, 2008
          Equal to or greater than  
  Less than 12 months 12 months Total
      Gross     Gross     Gross
  Estimated Unrealized Estimated Unrealized Estimated Unrealized
(dollars in thousands) Fair Value Losses Fair Value Losses Fair Value Losses
Non-investment grade securities:
                        
U.S. corporate securities
  138,528   14,543   44,533   5,249   183,061   19,792 
Asset-backed securities
  1,273   41   4,121   914   5,394   955 
Foreign corporate securities
  13,076   441   9,315   2,174   22,391   2,615 
       
Non-investment grade securities
  152,877   15,025   57,969   8,337   210,846   23,362 
       
Total fixed maturity securities
 $4,541,145  $279,208  $1,379,429  $172,448  $5,920,574  $451,656 
       
Equity securities
 $141,425  $29,811  $14,714  $5,205  $156,139  $35,016 
       
Total number of securities in an unrealized loss position
  1,111       507       1,618     
                         
                         
  As of December 31, 2007
          Equal to or greater than  
  Less than 12 months 12 months Total
      Gross     Gross     Gross
  Estimated Unrealized Estimated Unrealized Estimated Unrealized
(dollars in thousands) Fair Value Losses Fair Value Losses Fair Value Losses
Investment grade securities:
                        
U.S. corporate securities
 $1,185,664  $63,368  $487,626  $25,541  $1,673,290  $88,909 
Canadian and Canadian provincial governments
  78,045   1,077   4,313   86   82,358   1,163 
Residential mortgage-backed securities
  299,655   5,473   348,632   6,743   648,287   12,216 
Foreign corporate securities
  293,783   17,880   155,445   5,995   449,228   23,875 
Asset-backed securities
  341,337   24,958   72,445   5,722   413,782   30,680 
Commercial mortgage-backed securities
  110,097   4,499   46,647   588   156,744   5,087 
U.S. government and agencies
  700   1         700   1 
State and political subdivisions
  27,265   605   14,518   339   41,783   944 
Other foreign government securities
  127,397   1,635   75,354   2,878   202,751   4,513 
       
Investment grade securities
  2,463,943   119,496   1,204,980   47,892   3,668,923   167,388 
       
                         
Non-investment grade securities:
                        
U.S. corporate securities
  106,842   6,044   30,105   1,727   136,947   7,771 
Asset-backed securities
  1,996   776         1,996   776 
Foreign corporate securities
  9,692   1,930   3,524   165   13,216   2,095 
       
Non-investment grade securities
  118,530   8,750   33,629   1,892   152,159   10,642 
       
Total fixed maturity securities
 $2,582,473  $128,246  $1,238,609  $49,784  $3,821,082  $178,030 
       
Equity securities
 $83,166  $16,764  $19,073  $3,421  $102,239  $20,185 
       
Total number of securities in an unrealized loss position
  691       414       1,105     
                      
The investment securities in an unrealized loss position as of March 31,June 30, 2008 consisted of 1,2901,618 securities accounting for unrealized losses of $371.3$486.7 million. Of these unrealized losses 95.4%95.2% were investment grade and 62.0%67.0% were less than 20% below cost. The amount of the unrealized loss on these securities was primarily attributable to increases in interest rates, including a widening of credit default spreads.

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Of the investment securities in an unrealized loss position for 12 months or more as of March 31,June 30, 2008, 3890 securities were 20% or more below cost, including 3eight securities which were also below investment grade. These securities accounted for unrealized losses of approximately $0.7$3.2 million. These securities were all corporate bonds, were current on all terms and the Company currently expects to collect full principal and interest.
As of March 31,June 30, 2008, the Company expects these investments to continue to perform in accordance with their original contractual terms and the Company has the ability and intent to hold these investments securities until the recovery of the fair value up to the cost of the investment, which may bybe maturity. Accordingly, the Company does not consider these investments to be other-than-temporary impaired at March 31,June 30, 2008. However, from time to time when facts and circumstances arise, the Company may sell securities in the ordinary course of managing it’sits portfolio to meet diversification, credit quality, yield enhancement, asset-liability management and liquidity requirements.
The Company’s mortgage loan portfolio consists principally of investments in U.S.-based commercial offices, light industrial properties and retail locations. The mortgage loan portfolio is diversified by geographic region and property type. Substantially all mortgage loans are performing and no valuation allowance has been established as of March 31,June 30, 2008 or December 31, 2007.
Policy loans present no credit risk because the amount of the loan cannot exceed the obligation due the ceding company upon the death of the insured or surrender of the underlying policy. The provisions of the treaties in force and the underlying

33


policies determine the policy loan interest rates. Because policy loans represent premature distributions of policy liabilities, they have the effect of reducing future disintermediation risk. In addition, the Company earns a spread between the interest rate earned on policy loans and the interest rate credited to corresponding liabilities.
Funds withheld at interest comprised approximately 28.0%28.1% and 28.3% of the Company’s cash and invested assets as of March 31,June 30, 2008 and December 31, 2007, respectively. For agreements written on a modified coinsurance basis and certain agreements written on a coinsurance basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company, and are reflected as funds withheld at interest on the Company’s condensed consolidated balance sheet. 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 with amounts owed to the Company from the ceding company. Interest accrues to these assets at rates defined by the treaty terms. The Company is subject to the investment performance on the withheld assets, although it does not directly control them. These assets are primarily fixed maturity investment securities and pose risks similar to the fixed maturity securities the Company owns. The underlying portfolios also include options related to equity indexed annuity products. The market value changes associated with these investments have caused some volatility in reported investment income. This is largely offset by a corresponding change in interest credited, with minimal impact on income before taxes. To mitigate risk, the Company helps set the investment guidelines followed by the ceding company and monitors compliance. Ceding companies with funds withheld at interest had an average rating of “A+” at March 31,June 30, 2008 and December 31, 2007. Certain ceding companies maintain segregated portfolios for the benefit of the Company.
Other invested assets represented approximately 2.3%2.4% and 1.7% of the Company’s cash and invested assets as of March 31,June 30, 2008 and December 31, 2007, respectively. Other invested assets include derivative contracts, equity securities, preferred stocks, structured loans and limited partnership interests. The Company did not record an other-than-temporary write-down on its investments in limited partnerships in the first threesix months of 2008 or 2007.
Contractual Obligations
SinceFrom December 31, 2007 to June 30, 2008, the value of the Company’s obligation for collateral finance facility, including interest, decreased by $229.4$235.9 million due to substantially reduced variable interest rates in the current quarter as previously discussed. There were no other material changes in the Company’s contractual obligations from thatthose reported in the 2007 Annual Report.
Mortality Risk Management
In the event that mortality or morbidity experience develops in excess of expectations, some reinsurance treaties allow for increases to future premium rates. Other treaties include experience refund provisions, which may also help reduce RGA’s mortality risk. In the normal course of business, the Company seeks to limit its exposure to loss

42


on any single insured and to recover a portion of claims paid by ceding reinsurance to other insurance enterprises or retrocessionaires under excess coverage and coinsurance contracts. In the U.S., the Company retains a maximum of $8.0 million of coverage per individual life. In certain limited situations, due to the acquisition of in force blocks of business, the Company has retained more than $8.0 million per individual policy. In total, there are 2214 such cases of over-retained policies, for amounts averaging $1.7$2.5 million over the Company’s normal retention limit. The largest amount over-retained on any one life is $10.1 million. The Company has mitigatedenters into agreements with other reinsurers to mitigate the risk related to the over-retained policies, by entering into one-year agreements with other reinsurers that commencedwhich renew annually in September and October of 2007.October. For other countries, particularly those with higher risk factors or smaller books of business, the Company systematically reduces its retention. The Company has a number of retrocession arrangements whereby certain business in force is retroceded on an automatic or facultative basis.
The Company maintains a catastrophe insurance program (“Program”) that renews on September 7th of each year. The current Program began September 7, 2007, and covers events involving 10 or more insured deaths from a single occurrence. The Company retains the first $10 million in claims, the Program covers the next $40 million in claims, and the Company retains all claims in excess of $50 million. The Program covers reinsurance programs worldwide and includes losses due to acts of terrorism, including terrorism losses due to nuclear, chemical and/or biological events. The Program excludes losses from earthquakes occurring in California and also excludes losses from pandemics. The Program is insured by nine insurance companies and Lloyd’s Syndicates, with no single entity providing more than $10 million of coverage.
Counterparty Risk
In the normal course of business, the Company seeks to limit its exposure to reinsurance contracts by ceding a portion of the reinsurance to other insurance companies or reinsurers. Should a counterparty not be able to fulfill its obligation to the

34


Company under a reinsurance agreement, the impact could be material to the Company’s financial condition and results of operations.
Generally, RGA’s insurance subsidiaries retrocede amounts in excess of their retention to RGA Reinsurance, RGA Reinsurance Company (Barbados) Ltd., RGA Americas Reinsurance Company, Ltd., RGA Worldwide Reinsurance Company, Ltd. or RGA Atlantic Reinsurance Company, Ltd. External retrocessions are arranged through the Company’s retrocession pools for amounts in excess of its retention. As of March 31,June 30, 2008, all retrocession pool members in this excess retention pool reviewed by the A.M. Best Company were rated “A-”, the fourth highest rating out of fifteen possible ratings, or better. The Company also retrocedes most of its financial reinsurance business to other insurance companies to alleviate the strain on statutory surplus created by this business. For a majority of the retrocessionaires that are not rated, letters of credit or trust assets have been given as additional security in favor of RGA Reinsurance. In addition, the Company performs annual financial and in force reviews of its retrocessionaires to evaluate financial stability and performance.
The Company has never experienced a material default in connection with retrocession arrangements, nor has it experienced any material difficulty in collecting claims recoverable from retrocessionaires; however, no assurance can be given as to the future performance of such retrocessionaires or as to the recoverability of any such claims.
The Company relies upon its clients to provide timely, accurate information. The Company may experience volatility in its earnings as a result of erroneous or untimely reporting from its clients. The Company works closely with its clients and monitors this risk in an effort to minimize its exposure.
Market Risk
Market risk is the risk of loss that may occur when fluctuations in interest and currency exchange rates and equity and commodity prices change the value of a financial instrument. Since both derivative and nonderivative financial instruments have market risk, the Company’s risk management extends beyond derivatives to encompass all financial instruments held. The Company is primarily exposed to interest rate risk and foreign currency risk.
Interest rate risk arises from many of the Company’s primary activities, as the Company invests substantial funds in interest-sensitive assets and also has certain interest-sensitive contract liabilities. The Company manages interest rate risk and credit risk to maximize the return on the Company’s capital effectively and to preserve the value created by its business operations. As such, certain management monitoring processes are designed to minimize the impact of sudden and sustained changes in interest rates on fair value, cash flows, and interest income.

43


The Company is subject to foreign currency translation, transaction, and net income exposure. The Company manages its exposure to currency principally by matching invested assets with the underlying reinsurance liabilities to the extent possible. The Company has in place a net investment hedge of a portion of its investment in Canada operations. Translation differences resulting from translating foreign subsidiary balances to U.S. dollars are reflected in stockholders’ equity on the condensed consolidated balance sheets. The Company generally does not hedge the foreign currency exposure of its subsidiaries transacting business in currencies other than their functional currency (transaction exposure). The majority of the Company’s foreign currency transactions are denominated in Australian dollars, British pounds, Canadian dollars, Japanese yen, Korean won, the South African rand and euros.
There has been no significant change in the Company’s quantitative or qualitative aspects of market risk during the quarter ended March 31,June 30, 2008 from that disclosed in the 2007 Annual Report.
New Accounting Standards
In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 on its condensed consolidated financial statements.
In February 2008, the FASB issued Staff Position (“FSP”) No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions” (“FSP 140-3”). FSP 140-3 provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. FSP 140-3 is

35


effective prospectively for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of FSP 140-3 on its condensed consolidated financial statements.
Effective January 1, 2008, the Company adopted SFAS No. 157. SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The adoption of SFAS 157 resulted in a pre-tax gain of approximately $3.9 million, included in interest credited, related primarily to the decrease in the fair value of liability embedded derivatives associated with equity-indexed annuity products primarily from the incorporation of nonperformance risk, also referred to as the Company’s own credit risk, into the fair value calculation.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations — A Replacement of FASB Statement No. 141” (“SFAS 141(r)”) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“SFAS 160”). SFAS 141(r) establishes principles and requirements for how an acquirer recognizes and measures certain items in a business combination, as well as disclosures about the nature and financial effects of a business combination. SFAS 160 establishes accounting and reporting standards surrounding noncontrolling interest, or minority interests, which are the portions of equity in a subsidiary not attributable, directly or indirectly, to a parent. The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company is currently evaluating the impact of SFAS 141(r) on its accounting for future acquisitions and the impact of SFAS 160 on its condensed consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on an instrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company did not elect to apply the fair value option available under SFAS 159 for any of its eligible financial instruments.
Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q 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

44


strategies, earnings, revenues, income or loss, ratios, future financial performance, and growth potential of the Company. The words “intend,” “expect,” “project,” “estimate,” “predict,” “anticipate,” “should,” “believe,” and other similar expressions also are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results, performance, and achievements could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.
Numerous important factors could 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) changes in the Company’s financial strength and credit ratings or those of MetLife, Inc. (“MetLife”), the beneficial owner of a majority of the Company’s common shares, or its subsidiaries, and the effect of such changes on the Company’s future results of operations and financial condition, (3) inadequate risk analysis and underwriting, (4) general economic conditions or a prolonged economic downturn affecting the demand for insurance and reinsurance in the Company’s current and planned markets, (5) the availability and cost of collateral necessary for regulatory reserves and capital, (6) market or economic conditions that adversely affect the Company’s ability to make timely sales of investment securities, (7) 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, (8) fluctuations in U.S. or foreign currency exchange rates, interest rates, or securities and real estate markets, (9) adverse litigation or arbitration results, (10) the adequacy of reserves, resources and accurate information relating to settlements, awards and terminated and discontinued lines of business, (11) the stability of and actions by governments and economies in the markets in which the Company operates, (12) competitive factors and competitors’ responses to the Company’s initiatives, (13) the success of the Company’s clients, (14) successful execution of the Company’s entry into new markets, (15) successful development and introduction of new products and distribution opportunities, (16) the Company’s ability to successfully integrate and operate reinsurance business that the Company acquires, (17) regulatory action that may be taken by state Departments of Insurance with respect to the Company, MetLife, or its subsidiaries, (18) 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, (19) the threat of

36


natural disasters, catastrophes, terrorist attacks, epidemics or pandemics anywhere in the world where the Company or its clients do business, (20) changes in laws, regulations, and accounting standards applicable to the Company, its subsidiaries, or its business, (21) the effect of the Company’s status as an insurance holding company and regulatory restrictions on its ability to pay principal of and interest on its debt obligations, and (22) 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 the cautionary statements described in the periodic reports the Company files with the SEC. These forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligations to update these forward-looking statements, even though the Company’s situation may change in the future. The Company qualifies all of its forward-looking statements by these cautionary statements. 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 of this quarterly report on Form 10-Q and in the 2007 Annual Report.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
See “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” which is included herein.
ITEM 4. Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective.
There was no change in the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended March 31,June 30, 2008, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION
ITEM 1. Legal Proceedings
TheIn January 2006, the Company is currently a party to awas threatened with an arbitration related to its life reinsurance business. To date, the ceding company involved has not acted upon this threat. As of March 31,June 30, 2008, the partyceding company involved in this action has raised a claim in the amount of $4.9 million, none of which is $4.9 million in excess of the amount held in reservehas been accrued by the Company. The Company believes it has substantial defenses upon which to contest this claim, including but not limited to misrepresentation and breach of contract by direct and indirectthe ceding companies. company.
Additionally, from time to time, the Company is subject to litigation related to employment-related matters in the normal course of its business. The Company cannot predict or determine the ultimate outcome of the pending litigation or arbitrations or provide useful ranges of potential losses. It is the opinion of management, after consultation with counsel, that their outcomes, after consideration of the provisions made in the Company’s condensed consolidated financial statements, would not have acurrently has no such other material adverse effect on its consolidated financial position.litigation. However, it is possible that an adverse outcome on any particular arbitration or litigation situation could from time to time, have a material adverse effect on the Company’s consolidated net income in a particular reporting period.
ITEM 1A. Risk Factors
ThereIn the risk factors below, we refer to the Company as “we,” “us,” or “our”. Other than the risk factors listed below, there have been no material changes from the risk factors previously disclosed in the Company’s 2007 Annual Report.
MetLife is our majority shareholder and its interests may differ from the interests of RGA and our other security holders.
At June 30, 2008, MetLife was the beneficial owner of approximately 51.7% of our outstanding common stock. On June 2, 2008 MetLife and RGA jointly announced a proposed transaction that could lead to MetLife disposing of its majority interest in RGA. The transaction is subject to various conditions, including RGA shareholder and regulatory approvals, and could be completed as early as the third quarter of this year. As a result of MetLife’s ownership position, until it disposes of some or all of the 32,243,539 shares of our common stock it beneficially owns, MetLife may continue to have the ability to significantly influence matters requiring shareholder approval, including without limitation, the election and removal of directors, amendments to our articles of incorporation, mergers, acquisitions, changes of control of our company and sales of all or substantially all of our assets. In addition, at least as long as it is our majority shareholder, MetLife is required to consolidate our results of operations into MetLife’s financial statements. As a result, our board of directors, including the members who are also employed by or affiliated with MetLife, may consider not only the short-term and long-term effect of operating decisions on us, but also the effect of such decisions on MetLife and its affiliates.
Your interests as a holder of our securities may conflict with the interests of MetLife, and the price of our common stock or other securities could be adversely affected by this influence or by the perception that MetLife may seek to sell shares of common stock in the future.
If we experience an ownership change or upon the occurrence of certain other events, we may be unable to realize the benefits of our deferred tax asset.
RGA and certain subsidiaries have significant net operating loss carryforwards (“NOLs,”) and other tax attributes. At December 31, 2007, we had recognized a cumulative gross deferred tax asset associated with NOLs of approximately $932.4 million. NOLs may be carried forward to offset taxable income in future years and eliminate income taxes otherwise payable on such taxable income, subject to certain adjustments. Based on current federal corporate income tax rates, our NOLs and other carryforwards could provide a benefit to us, if fully utilized, of significant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our otherwise taxable income. If we do not have sufficient taxable income in future years to use the tax benefits before they expire, we will lose the benefit of these NOLs permanently.
Additionally, if we experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986 as amended (“the Code”), the NOLs would be subject to an annual limit on the amount of the taxable income that may be offset by any NOLs generated prior to the ownership change. If an ownership change were to occur, we could be unable to use a portion of our NOLs to offset taxable income. In general, an ownership change occurs when, as of any testing date, the percentage of stock of a corporation owned by one or more “5-percent shareholders,” as defined in the Code and the related Treasury regulations, has increased by more than 50 percentage points over the lowest percentage of stock of the corporation owned by such shareholders at any time

3746


during the three-year period preceding such date. In general, persons who own 5% or more (by value) of a corporation’s stock are 5-percent shareholders, and all other persons who own less than 5% (by value) of a corporation’s stock are treated, together, as a single, public group 5-percent shareholder, regardless of whether they own an aggregate of 5% or more (by value) of a corporation’s stock. If a corporation experiences an ownership change, it is generally subject to an annual limitation, which limits its ability to use its NOLs and other tax attributes to an amount equal to the equity value of the corporation multiplied by the federal long term tax-exempt rate.
At June 30, 2008, MetLife was the beneficial owner of approximately 51.7% of our outstanding common stock. On June 2, 2008, MetLife and RGA jointly announced a proposed transaction that could lead to MetLife disposing of its majority interest in RGA. The transaction is subject to various conditions, including RGA shareholder and regulatory approvals, and could be completed as early as the third quarter of 2008. A divestiture by MetLife will increase the possibility of RGA experiencing such an ownership change. An ownership change could limit our ability to continue to recognize the deferred tax asset associated with the NOLs. A reduction in the amount of our deferred tax asset would have a negative effect on reported earnings and capital levels, and could adversely affect the level of taxes we pay in future years.
Other events outside of RGA’s control, such as certain acquisitions and dispositions of RGA common stock, RGA class A common stock and RGA class B common stock, also may cause RGA (and, consequently, its subsidiaries) to experience an ownership change under Section 382 of the Code and the related Treasury regulations, and limit the ability of RGA and its subsidiaries to utilize fully such NOLs and other tax attributes.
If RGA were to experience an ownership change, it could potentially have in the future higher U.S. federal income tax liabilities than it would otherwise have had and it may also result in certain other adverse consequences to RGA. In this connection, RGA has adopted a Section 382 shareholder rights plan and, at the special shareholders meeting to be held in connection with the potential divestiture transaction with MetLife, the RGA board of directors will recommend the adoption of new Article Fourteen to RGA’s articles of incorporation which will contain certain proposed acquisition restrictions that are intended to reduce the likelihood that RGA and its subsidiaries will experience an ownership change under Section 382 of the Code. There can be no assurance, however, that these efforts will prevent the divestiture, together with certain other transactions involving the stock of RGA, from causing RGA to experience an ownership change and the adverse consequences that may arise from such events.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table summarizes the Company’s repurchase activity of its common stock during the firstsecond quarter ended March 31,June 30, 2008:
                 
          Total Number of Maximum Number of
      Average Price Shares Purchased as Shares that May Yet
  Total Number of Paid Part of Publicly Be Purchased Under
  Shares Purchased (1) per Share Announced Plans the Plans
February 1, 2008 – February 29, 2008  56,129  $55.10       
             
          Total Number of Maximum Number
        Shares Purchased as of Shares that May
  Total Number of Average Price Paid Part of Publicly Yet Be Purchased
  Shares Purchased (1) per Share Announced Plans Under the Plans
April 1, 2008 – April 30, 2008  210  $53.60   
 
(1) In FebruaryApril 2008 the Company net settled – issuing 217,375650 shares from treasury and repurchasing from recipients 56,129210 shares in settlement of income tax withholding requirements incurred by the recipients of an equity incentive award.
Under a board of directors approved plan, the Company may purchase at its discretion up to $50 million of its common stock on the open market. As of March 31,June 30, 2008, the Company had purchased 225,500 shares of treasury stock under this program at an aggregate price of $6.6 million. All purchases were made during 2002. The Company generally uses treasury shares to support the future exercise of options granted under its stock option plans.

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ITEM 4.
Submission of Matters to a Vote of Security Holders
The Company’s Annual Meeting of Shareholders was held on May 21, 2008. At the Annual Meeting, the following proposals were voted upon by the shareholders as indicated below:
          (1) Election of the following Directors:
         
Directors Voted For Withheld
J. Cliff Eason  54,918,894   1,619,008 
Joseph A. Reali  46,084,307   10,453,595 
             
  Voted For Voted Against Abstain
(2) Proposal to approve the Company’s 2008 Management Incentive Plan  54,629,998   1,067,546   840,358 
             
(3) Proposal to approve an amendment to the Company’s Flexible Stock Plan  53,975,129   2,180,445   382,328 
ITEM 6. Exhibits
See index to exhibits.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
     
 Reinsurance Group of America, Incorporated
August 1, 2008 By:  /s/ A. Greig Woodring       
  A. Greig Woodring  
By:/s/ A. Greig WoodringMay 2, 2008
A. Greig Woodring
  President & Chief Executive Officer
(Principal Executive Officer) 
August 1, 2008 By:  /s/ Jack B. Lay       
  (Principal Executive Officer)Jack B. Lay  
By:/s/ Jack B. LayMay 2, 2008
Jack B. Lay
  Senior Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer) 
 
 (Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS
   
Exhibit  
Number Description
2.1Recapitalization and Distribution Agreement, dated as of June 1, 2008 (the “R&D Agreement”), by and between Reinsurance Group of America, Incorporated (“RGA”) and MetLife, Inc. (the schedules have been omitted pursuant to Item 601 (b)(2) of Regulation S-K and will be furnished supplementally to the SEC upon request), incorporated by reference to Exhibit 2.1 of Current Report on Form 8-K filed June 5, 2008.
3.1 Restated Articles of Incorporation, incorporated by reference to Exhibit 3.1 of Current Report on Form 8-K filed June 30, 2004.
 
3.2 Bylaws of RGA, as amended, incorporated by reference to Exhibit 3.2 of Quarterly Report on Form 10-Q filed August 6, 2004.
 
3.3 Form of Amended and Restated Articles of Incorporation of RGA proposed for approval by shareholders of RGA at special meeting of shareholders to be called pursuant to the R&D Agreement (constituting Exhibit A to the R&D Agreement listed as Exhibit 2.1 hereto), incorporated by reference to Exhibit 3.3 of Current Report on Form 8-K filed June 5, 2008.
3.4Form of Amended and Restated Bylaws of RGA to become effective subject to and upon consummation of the recapitalization pursuant to the R&D Agreement (constituting Exhibit B to the R&D Agreement filed as Exhibit 2.1 hereto), incorporated by reference to Exhibit 3.3 of Current Report on Form 8-K filed June 5, 2008.
4.1Form of Amended and Restated Section 382 Rights Agreement between RGA and Mellon Investor Services, LLC proposed for approval by shareholders of RGA at special meeting of shareholders to be called pursuant to the R&D Agreement, incorporated by reference to Exhibit C to the proxy statement/prospectus in part I of Registration Statement on Form S-4 (No. 333-151390) filed on July 29, 2008.
10.12008 Management Incentive Plan, effective May 21, 2008, incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K dated July 21, 2008.
10.2Fourth Amendment, effective as of May 23, 2007, to the RGA Flexible Stock Plan, as amended and restated July 1, 1998, incorporated by reference to Exhibit 10.6 of Current Report on Form 8-K dated July 21, 2008.
10.3Fifth Amendment, effective as of May 21, 2008 to the RGA Flexible Stock Plan, as amended and restated July 1, 1998, incorporated by reference to Exhibit 10.7 of Current Report on Form 8-K dated July 21, 2008.
 
31.1 Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2 Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
 
32.1 Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2 Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

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