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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Act of 1934 for the fiscal year ended December 31, 1996
- ---- Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-11848
REINSURANCE GROUP OF AMERICA, INCORPORATED
(Exact name of registrant as specified in its charter)
Missouri 43-1267032
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
660 Mason Ridge Center Drive, St. Louis, Missouri 63141
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 453-7300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $0.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on March 1,
1997, as reported on the New York Stock Exchange was approximately
$306,440,904.
As of March 1, 1997, Registrant had outstanding 16,978,896 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Annual Report to Shareholders for 1996 ("the Annual
Report") are incorporated by reference in Parts I, II, and IV of this Form
10-K. Certain portions of the Definitive Proxy Statement in connection with
the 1997 Annual Meeting ("the Proxy Statement") which will be filed with the
Securities and Exchange Commission not later than 120 days after the
Registrant's fiscal year ended December 31, 1996, are incorporated by
reference in Part III of this Form 10-K.
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REINSURANCE GROUP OF AMERICA, INCORPORATED
Form 10-K
YEAR ENDED DECEMBER 31, 1996
INDEX
Item Page
Number of this Form
- ------ ------------
Part I
1. Business 3
2. Properties 19
3. Legal Proceedings 19
4. Submission of Matters to a Vote of Security Holders 19
Part II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 19
6. Selected Financial Data 20
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 20
Part III
10. Directors and Executive Officers of the Registrant 20
11. Executive Compensation 22
12. Security Ownership of Certain Beneficial Owners and Management 22
13. Certain Relationships and Related Transactions 22
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 23
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Item 1. BUSINESS
A. Overview
Reinsurance Group of America, Incorporated (RGA) is an insurance
holding company formed December 31, 1992. The consolidated financial
statements include the assets, liabilities, and results of operations of RGA;
RGA Reinsurance Company (RGA Reinsurance), formerly Saint Louis Reinsurance
Company; RGA Australian Holdings PTY, Limited (Australian Holdings); RGA
Reinsurance Company (Barbados) Ltd. (RGA Barbados); RGA Reinsurance Company
(Bermuda) Ltd. (RGA Bermuda); G.A. Canadian Holdings, Ltd. (Canadian
Holdings), a Canadian insurance holding company; RGA Sudamerica, S.A., a
Chilean holding company; and Manantial Seguros de Vida, S.A. (Manantial), an
Argentine life insurance company; along with the subsidiaries of RGA
Reinsurance, Australian Holdings, Canadian Holdings, and RGA Sudamerica,
S.A., subject to an ownership position of fifty percent or more
(collectively, the Company).
The Company is primarily engaged in ordinary life reinsurance, accident
and health reinsurance, and international life and disability on a direct and
reinsurance basis. RGA and its predecessor, the Reinsurance Division of
General American Life Insurance Company (General American), have been engaged
in the business of life reinsurance since 1973. As of December 31, 1996, the
Company had approximately $2.9 billion in consolidated assets.
Reinsurance is an arrangement under which an insurance company, the
"reinsurer," agrees to indemnify another insurance company, the "ceding
company," for all or a portion of the insurance risks underwritten by the
ceding company. Reinsurance is designed to (i) reduce the net liability on
individual risks, thereby enabling the ceding company to increase the volume
of business it can underwrite, as well as increase the maximum risk it can
underwrite on a single life or risk; (ii) stabilize operating results by
leveling fluctuations in the ceding company's loss experience; (iii) assist
the ceding company to meet applicable regulatory requirements; and (iv)
enhance the ceding company's financial strength and surplus position.
"Ordinary life" reinsurance primarily refers to reinsurance of
individual term life insurance policies, whole life insurance policies,
universal life insurance policies, and joint and survivor insurance policies.
Ceding companies typically contract with more than one company to reinsure
their business. Reinsurance may be written on an indemnity or an assumption
basis. Indemnity reinsurance does not discharge a ceding company from
liability to the policyholder; a ceding company is required to pay the full
amount of its insurance obligations regardless of whether it is entitled or
able to receive payments from its reinsurers. In the case of assumption
reinsurance, the ceding company is discharged from liability to the
policyholder, with such liability passed to the reinsurer. Reinsurers also
may purchase reinsurance, known as retrocession reinsurance, to cover their
own risk exposure. Reinsurance companies enter into retrocession agreements
for reasons similar to those that cause primary insurers to purchase
reinsurance.
Reinsurance may be written on a facultative basis or an automatic
treaty basis. Facultative reinsurance is individually underwritten by the
reinsurer for each policy to be reinsured, with the pricing and other terms
established at the time the policy is underwritten based upon rates
negotiated in advance. Facultative reinsurance normally is purchased by
insurance companies for medically impaired lives, unusual risks, or
liabilities in excess of binding limits on their automatic treaties.
An automatic reinsurance treaty provides that the ceding company will
cede risks to a reinsurer on specified blocks of business where the
underlying policies meet the ceding company's underwriting criteria. In
contrast to facultative reinsurance, the reinsurer does not approve each
individual risk. Automatic reinsurance treaties generally provide that the
reinsurer will be liable for a portion of the risk associated with the
specified policies written by the ceding company. Automatic reinsurance
treaties specify the ceding company's binding limit, which is the maximum
amount of risk on a given life that can be ceded automatically and that the
reinsurer must accept. The binding limit may be stated either as a multiple
of the ceding company's retention or as a stated dollar amount.
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Facultative and automatic reinsurance may be written as yearly
renewable term, coinsurance, or modified coinsurance, which vary with the
type of risk assumed and the manner of pricing the reinsurance. Under a
yearly renewable term treaty, the reinsurer assumes only the mortality or
morbidity risk. Under a coinsurance arrangement, depending upon the terms of
the contract, the reinsurer may share in the risk of loss due to mortality or
morbidity, lapses, and the investment risk, if any, inherent in the
underlying policy. Modified coinsurance differs from coinsurance only in
that the assets supporting the reserves are retained by the ceding company
while the risk is transferred to the reinsurer.
Generally, the amount of ordinary life reinsurance ceded under
facultative and automatic reinsurance agreements is stated on either an
excess or a quota share basis. Reinsurance on an excess basis covers amounts
in excess of an agreed-upon retention limit. Retention limits vary by ceding
company and also vary by age and underwriting classification of the insured,
product, and other factors. Under quota share reinsurance, the ceding
company states its retention in terms of a fixed percentage of the risk that
will be retained, with the remainder up to the maximum binding limit to be
ceded to one or more reinsurers.
Reinsurance agreements, whether facultative or automatic, may provide
for recapture rights on the part of the ceding company. Recapture rights
permit the ceding company to reassume all or a portion of the risk formerly
ceded to the reinsurer after an agreed-upon period of time (generally 10
years) and subject to certain other conditions, including that the ceding
company kept its full retention. Recapture of business previously ceded does
not affect premiums ceded prior to the recapture of such business.
The potential adverse effects of recapture rights are mitigated by the
following factors: (i) recapture rights vary by treaty and the risk of
recapture is a factor which is taken into account when pricing a reinsurance
agreement; (ii) ceding companies generally may exercise their recapture
rights only to the extent they have increased their retention limits for the
reinsured policies; and (iii) ceding companies generally must recapture all
of the policies eligible for recapture under the agreement in a particular
year if any are recaptured, which prevents a ceding company from recapturing
only the most profitable policies. In addition, when a ceding company
increases its retention and recaptures reinsured policies, the reserves
maintained by the reinsurer to support the recaptured portion of the policies
are released by the reinsurer.
The Company also provides financial reinsurance to assist ceding
companies in meeting applicable regulatory requirements and enhancing ceding
companies' financial strength and statutory surplus position. The Company
provides ceding companies financial reinsurance by committing cash or
assuming insurance liabilities. Generally, such amounts are offset by
receivables from ceding companies which are supported by the future profits
from the reinsured block of business. The Company earns a return based on
the amount of outstanding reinsurance. The Company retrocedes most of this
business to other insurance companies to alleviate the strain created by this
business.
B. Corporate Structure
RGA is a holding company, the principal assets of which consist of the
common stock of RGA Reinsurance and Canadian Holdings, as well as investments
in several other subsidiaries or joint ventures and a portfolio consisting
primarily of highly liquid investment securities. The primary source of
funds for RGA to make dividend distributions is dividends paid to RGA by RGA
Reinsurance and Canadian Holdings and investment securities maintained in the
portfolio. RGA Reinsurance's principal source of funds is derived from
current operations. Canadian Holdings' principal source of funds is
dividends on its equity interest in RGA Canada Management Company, Ltd. (RGA
Canada Management), whose principal source of funds is dividends paid by RGA
Life Reinsurance Company of Canada (RGA Canada). RGA Canada's principal
source of funds is derived from current operations. At December 31, 1996,
$97.5 million of liquid investment securities were held by RGA, and were
available for any corporate funding needs that may arise.
The U.S. ordinary life reinsurance business represented 72.1% of the
Company's business as measured by 1996 net premiums and has experienced
significant growth since inception to 1996. The U.S. ordinary life operation
markets life reinsurance, through RGA Reinsurance, primarily to the largest
U.S. ordinary life insurance
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companies. RGA Reinsurance, a Missouri domiciled stock life insurance
company, is wholly-owned by RGA. As of December 31, 1996, RGA Reinsurance
had statutory capital and surplus of $205.9 million.
The Company's Canadian ordinary life reinsurance business, which
represented 9.3% of the Company's business as measured by 1996 net premiums,
is conducted primarily through RGA Canada, an indirect subsidiary of Canadian
Holdings. Canadian Holdings, a wholly-owned subsidiary of RGA, is a New
Brunswick holding company which owns 100% of RGA Canada Management, also a
New Brunswick holding company, which in turn owns 100% of RGA Canada.
The Company's accident and health reinsurance business, which
represented 8.5% of the Company's business as measured by 1996 net premiums,
is assumed by RGA Reinsurance. RGA Reinsurance owns 51% of Fairfield
Management Group, Inc. (Fairfield), formerly known as Great Rivers Holding
Company, which in turn owns 100% of Great Rivers Reinsurance Management, Inc.
(Great Rivers Reinsurance Management). Great Rivers Reinsurance Management
performs underwriting and administrative services for the accident and health
business reinsured by RGA Reinsurance. In addition, Fairfield owns 100% of
Reinsurance Partners, Inc. (Re Partners), formerly known as Adrian Baker
Reinsurance Intermediaries Inc. Fairfield also owns 80% of RGA U.K.
Underwriting Agency Limited (RGA UK), a contact office for RGA Reinsurance
in the United Kingdom. Management of Fairfield owns the remaining 49% of
Fairfield. RGA and management have granted each other certain rights of
first refusal with respect to the stock of Fairfield. RGA has certain rights
and obligations to purchase the remaining 49% of the stock of Fairfield.
Management of RGA UK owns the remaining 20% of RGA UK. See "Certain
Relationships and Related Transactions."
During 1996, RGA continued to be active in the international insurance
market. Business in the other international segment represented 10.1% of the
Company's business as measured by 1996 net premiums. The other international
segment represents business which is primarily in the Latin American and Asia
Pacific regions. RGA Sudamerica, S.A., which is 99% owned by RGA and 1%
owned by RGA Barbados, is a Chilean holding company which currently has a 50%
investment in BHIF America Seguros de Vida, S.A. (BHIF America), and a 99%
investment in RGA Reinsurance Company Chile S.A. (RGA Chile), (the remaining
1% of RGA Chile is owned by RGA Barbados). BHIF America sells Chilean
insurance products, including single premium immediate annuities, credit
life, and disability insurance. In July 1996, RGA created RGA Chile, which is
licensed to assume life reinsurance business in Chile. To date, all business
assumed by RGA Chile was ceded from BHIF America. RGA also operates in
Argentina through Manantial, a subsidiary which is 99% owned by RGA and 1%
owned by RGA Sudamerica S.A. Manantial markets and sells individual, group,
and credit life and disability insurance. RGA Reinsurance also provides life
and certain forms of disability reinsurance to life insurance companies
throughout the world.
In January 1996, RGA formed Australian Holdings, a wholly-owned holding
company, and RGA Reinsurance Company of Australia Limited (RGA Australia), a
wholly-owned reinsurance company of Australian Holdings licensed to assume
life reinsurance in Australia.
RGA Barbados was formed and capitalized in 1995, providing reinsurance
for a portion of certain business assumed by RGA Reinsurance from the ITT
Lyndon Life Insurance Company and certain other reinsurance business. During
1996, RGA also formed a subsidiary in Bermuda, RGA Bermuda, which had not
assumed any reinsurance business as of December 31, 1996.
Historical Review
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On December 31, 1992, RGA Canada assumed the Reinsurance Division's
Canadian business by means of a retrocession reinsurance agreement with
General American (the "Canadian Retrocession Agreement"). On the same date,
RGA Canada retroceded back to the Reinsurance Division pursuant to a
retrocession agreement with General American amounts assumed by RGA Canada
pursuant to the Canadian Retrocession Agreement which exceeded RGA Canada's
retention limits (the "RGA Canada Retrocession Agreement"). On December 31,
1992, the Reinsurance Division also made a C$10 million capital contribution
to RGA Canada and transferred to RGA
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Canada cash equal to the liabilities assumed by RGA Canada pursuant to the
Canadian Retrocession Agreement, net of amounts retroceded back to the
Reinsurance Division pursuant to the RGA Canada Retrocession Agreement.
On January 1, 1993, RGA Reinsurance entered into a retrocession
reinsurance agreement with General American (known as the "U.S. Retrocession
Agreement" and, together with the Canadian Retrocession Agreement, known as
the "Retrocession Agreements") pursuant to which all of the business of the
General American Reinsurance Division (including the Canadian business
retroceded back to the Reinsurance Division by RGA Canada pursuant to the RGA
Canada Retrocession Agreement) was transferred to RGA Reinsurance, net of the
financial effects of all other retrocession agreements of the Reinsurance
Division. As of January 1, 1993, the Reinsurance Division also made a $10
million capital contribution to RGA Reinsurance and transferred to RGA
Reinsurance investment assets equal to the liabilities assumed by RGA
Reinsurance pursuant to the U.S. Retrocession Agreement. The remainder of
the investment portfolio was transferred by the Reinsurance Division to RGA
in April 1993, along with the stock of RGA Reinsurance and Canadian Holdings
to RGA. As of the first day of June 1993, all of the full time employees in
the Reinsurance Division transferred to RGA Reinsurance.
The foregoing transactions, including the transfer to RGA of the stock
of RGA Reinsurance and Canadian Holdings, the execution of the Retrocession
Agreements, the transfers of investment assets to RGA and RGA Reinsurance,
and the capital contributions to RGA Canada and RGA Reinsurance, are
hereinafter collectively referred to as the "Restructuring."
Intercorporate Relationships
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As a result of the Restructuring, the Company has all the economic
benefits and risks of the reinsurance agreements ceded by General American
pursuant to the Retrocession Agreements, although General American currently
remains the contracting party with some of the underlying ceding companies.
RGA operates on a stand-alone basis following the Restructuring,
however General American or its affiliates continue to provide certain
administrative and other services to RGA and RGA Reinsurance pursuant to
separate administrative services agreements, and provide investment advisory
services to RGA, RGA Reinsurance, Australian Holdings, RGA Barbados, and RGA
Canada pursuant to separate investment advisory agreements.
The transfer of the Reinsurance Division to RGA has had no material
effect on the existing reinsurance business of the Reinsurance Division.
Some business of RGA Reinsurance continues to be written through General
American pursuant to a marketing agreement between RGA Reinsurance and
General American. Under the marketing agreement, General American has agreed
to amend and terminate its existing assumed and retroceded reinsurance
agreements pursuant to the Retrocession Agreements only at the direction of
RGA Reinsurance, thus giving RGA Reinsurance the contractual right to direct
future changes to existing reinsurance agreements. Further, General American
has agreed, during the term of the marketing agreement, to enter into
additional reinsurance agreements under which it is the reinsurer at, and
only upon, the direction of RGA Reinsurance. Therefore, until December 31,
1999, the date on which the marketing agreement expires, General American
will be precluded from competing with the Company, unless RGA Reinsurance
elects to terminate the marketing agreement earlier. Pursuant to the U.S.
Retrocession Agreement, any new reinsurance contracts will automatically be
retroceded to RGA Reinsurance. Although primary insurers must look to
General American for payment in the first instance with respect to
reinsurance business written through General American, the Company will be
ultimately liable to General American with respect to such reinsurance.
General American charges RGA Reinsurance quarterly an amount equal to, on an
annual basis, 0.25% of specified policy-related liabilities that are
associated with existing reinsurance treaties written by General American for
the benefit of RGA Reinsurance. Most of the existing reinsurance agreements
between General American and various ceding companies were transferred to RGA
Reinsurance, replacing General American as the direct party to the treaties.
As of December 31, 1996, 11 companies had not novated their business directly
to RGA Reinsurance which represented 9.8% of RGA Reinsurance's statutory net
premiums.
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Ratings
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The ability of RGA Reinsurance to write reinsurance for its own account
will depend on its financial condition and its ratings. A.M. Best, an
independent insurance company rating organization, has rated RGA Reinsurance
"A+." A.M. Best's ratings are based upon an insurance company's ability to
pay policyholder obligations and are not directed toward the protection of
investors. A.M. Best's ratings for insurance companies currently range from
"A++" to "F", and some companies are not rated. Publications of A.M. Best
indicate that "A+" and "A++" ratings are assigned to those companies which,
in A.M. Best's opinion, have achieved superior overall performance when
compared to the standards established by A.M. Best and generally have
demonstrated a strong ability to meet their policyholder obligations over a
long period of time. In evaluating a company's financial strength and
operating performance, A.M. Best reviews the company's profitability,
leverage, and liquidity as well as its spread of risk, the quality and
appropriateness of its reinsurance program, the quality and diversification
of its assets, the adequacy of its policy or loss reserves, the adequacy of
its surplus, its capital structure, management's experience and objectives,
and policyholders' confidence.
Additionally, RGA Reinsurance has received an "AA" rating from Standard &
Poor's and an "A1" rating from Moody's Investor Services for claims-paying
ability. These ratings represent Standard & Poor's third highest rating and
Moody's fifth highest rating.
Regulation
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RGA Reinsurance, RGA Canada, BHIF America, RGA Chile, Manantial, RGA
Barbados, RGA Bermuda, and RGA Australia are regulated by authorities in
Missouri, Canada, Chile, Argentina, Barbados, Bermuda, and Australia,
respectively. RGA Reinsurance is subject to regulations in the other
jurisdictions in which it is licensed or authorized to do business.
Insurance laws and regulations, among other things, establish minimum capital
requirements and limit the amount of dividends, distributions, and
intercompany payments affiliates can make without prior regulatory approval.
Missouri law imposes restrictions on the amounts and type of investments
insurance companies like RGA Reinsurance may hold.
Guidelines on Minimum Continuing Capital and Surplus Requirements
("MCCSR") became effective for Canadian insurance companies in December 1992,
and Risk-Based Capital ("RBC") guidelines promulgated by the National
Association of Insurance Commissioners ("NAIC") became effective for U.S.
companies in 1993. The MCCSR risk-based capital guidelines, which are
applicable to RGA Canada, strengthen surplus requirements and take into
account both assets and liabilities in establishing solvency margins. The
RBC guidelines, applicable to RGA Reinsurance, similarly identify minimum
capital requirements based upon business levels and asset mix. Both RGA
Canada and RGA Reinsurance maintain capital levels in excess of the amounts
required by these guidelines. Regulations in Chile, Argentina, Australia,
and Barbados also require certain minimum capital levels, and subject the
companies operating there to oversight by the applicable regulatory bodies.
The Company's subsidiaries in Chile, Argentina, Australia, and Barbados meet
the minimum capital requirements in their respective jurisdiction. The
Company cannot predict the effect that any NAIC recommendations or proposed
or future legislation or rule-making in the U.S., Canada, or in other
countries where subsidiaries have been created may have on the financial
condition or operations of the Company or its subsidiaries.
RGA is regulated in Missouri as an insurance holding company. The
Company is subject to regulation under the insurance and insurance holding
company statutes of Missouri. The Missouri insurance holding company laws
and regulations generally require insurance and reinsurance subsidiaries of
insurance holding companies to register with the Missouri Department of
Insurance and to file with the Missouri Department of Insurance certain
reports describing, among other information, their capital structure,
ownership, financial condition, certain intercompany transactions, and
general business operations. The Missouri insurance holding company statutes
also require prior regulatory agency approval or, in certain circumstances,
prior notice of certain material intercompany transfers of assets as well as
certain transactions between insurance companies, their parent companies and
affiliates.
Under Missouri insurance laws and regulations, unless (i) certain
filings are made with the Missouri Department of Insurance, (ii) certain
requirements are met, including a public hearing, and (iii) approval or
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exemption is granted by the Missouri Director of Insurance, no person may
acquire any voting security or security convertible into a voting security of
an insurance holding company, such as RGA, which controls a Missouri
insurance company, or merge with such a holding company, if as a result of
such transaction such person would "control" the insurance holding company.
"Control" is presumed to exist under Missouri law if a person directly or
indirectly owns or controls 10% or more or the voting securities of another
person.
Current Missouri law (applicable to RGA and RGA Reinsurance) permits
the payment of dividends or distributions which, together with dividends or
distributions paid during the preceding 12 months, do not exceed the greater
of (i) 10% of statutory capital and surplus as of the preceding December 31
or (ii) statutory net gain from operations for the preceding calendar year.
Any proposed dividend in excess of this amount is considered an
"extraordinary dividend" and may not be paid until it has been approved, or a
30-day waiting period has passed during which it has not been disapproved, by
the Missouri Director of Insurance. In addition, dividends may be paid only
to the extent the insurer has earned surplus (as opposed to contributed
surplus). The maximum amount available for payment of dividends in 1997 by
RGA Reinsurance under Missouri law, without the prior approval of the
Missouri Director of Insurance, is $26.0 million.
In contrast to current Missouri law, the NAIC Model Insurance Holding
Company Act (the "Model Act") defines an extraordinary dividend as a dividend
or distribution which, together with dividends or distributions paid during
the preceding 12 months, exceeds the lesser of (i) 10% of statutory capital
and surplus as of the preceding December 31 or (ii) statutory net gain from
operations for the preceding calendar year. The Company is unable to predict
whether, when, or in what form Missouri will enact a new measure for
extraordinary dividends. The maximum amount available for payment on
dividends in 1997 by RGA Reinsurance under the Model Act without prior
approval of the Missouri Director of Insurance would have been $20.6 million.
In addition to the foregoing, Missouri insurance laws and regulations
require that the statutory surplus of RGA Reinsurance following any dividend
or distribution be reasonable in relation to its outstanding liabilities and
adequate to meet its financial needs. The Missouri Director of Insurance may
bring an action to enjoin or rescind the payment of a dividend or
distribution by RGA Reinsurance that would cause its statutory surplus to be
inadequate under the standards of Missouri.
There are no express restrictions on the declaration of dividends by
Canadian Holdings, RGA Canada Management, or RGA Canada under Canadian
insurance laws and regulations. However, RGA Canada must give notice of any
dividend to the Superintendent of Financial Institutions of Canada at least
10 days prior to the date of payment. In addition, the Canadian MCCSR
guidelines consider both assets and liabilities in establishing solvency
margins, the effect of which could limit the maximum amount of dividends that
may be paid by RGA Canada. RGA Canada's ability to declare and pay dividends
in the future will be affected by its continued ability to comply with such
guidelines. The maximum amount available for payment of dividends by RGA
Canada to RGA Canada Management under the Canadian MCCSR guidelines, which
have the effect of restricting the payment of dividends by RGA Canada in 1997
while maintaining solvency margins, was $7.2 million at December 31, 1996.
The insurance laws and regulations, as well as the level of supervisory
authority that may be exercised by the various insurance departments, vary by
jurisdiction, but generally grant broad powers to supervisory agencies or
regulators to examine and supervise insurance companies and insurance holding
companies with respect to every significant aspect of the conduct of the
insurance business, including approval or modification of contractual
arrangements. These laws and regulations generally require insurance
companies to meet certain solvency standards and asset tests, to maintain
minimum standards of business conduct, and to file certain reports with
regulatory authorities, including information concerning their capital
structure, ownership, and financial condition, and subject insurers to
potential assessments for amounts paid by guarantee funds.
RGA Reinsurance and RGA Canada are required to file annual or quarterly
statutory financial statements in each jurisdiction in which they are
licensed. Additionally, RGA Reinsurance and RGA Canada are subject to
periodic examination by the insurance departments of the jurisdictions in
which each is licensed, authorized, or accredited. The Missouri Department
of Insurance most recent examination of RGA Reinsurance was for the year
ended December 31, 1995. Management of the Company believes the result of
this examination will contain no
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material adverse findings. RGA Canada, which was formed in 1992, was reviewed
by the Canadian Superintendent of Financial Institutions during 1995. The
result of this examination contained no material adverse findings.
Although some of the rates and policy terms of U.S. primary insurance
agreements are regulated by state insurance departments, the rates, policy
terms, and conditions of reinsurance agreements generally are not subject to
regulation by any regulatory authority.
In the event of a default on any debt that may be incurred by RGA or
the bankruptcy, liquidation, or other reorganization of RGA, the creditors
and stockholders of RGA will have no right to proceed against the assets of
RGA Reinsurance, RGA Canada, or other subsidiaries of RGA. If RGA
Reinsurance were to be liquidated, such liquidation would be conducted by the
Missouri Director of Insurance as the receiver with respect to such insurance
company's property and business. If RGA Canada were to be liquidated, such
liquidation would be conducted pursuant to the general laws relating to the
winding-up of Canadian federal companies. In both cases, all creditors of
such insurance company, including, without limitation, holders of its
reinsurance agreements and, if applicable, the various state guaranty
associations, would be entitled to payment in full from such assets before
RGA, as a direct or indirect stockholder, would be entitled to receive any
distributions made to it prior to commencement of the liquidation
proceedings, and, if the subsidiary was insolvent at the time of the
distribution, shareholders of RGA might likewise be required to refund
dividends subsequently paid to them.
Certain state legislatures have considered or enacted laws that alter,
and in many cases increase, state regulation of insurance holding companies.
In recent years, the NAIC and state legislators have begun re-examining
existing laws and regulations, specifically focusing on insurance company
investments and solvency issues, risk-based capital guidelines, intercompany
transactions in a holding company system, and rules concerning extraordinary
dividends.
Discussions continue in the Congress of the United States concerning
the future of the McCarran-Ferguson Act, which exempts the "business of
insurance" from most federal laws, including anti-trust laws, to the extent
such business is subject to state regulation. Judicial decisions narrowing
the definition of what constitutes the "business of insurance" and repeal or
modification of the McCarran-Ferguson Act may limit the ability of the
Company, and RGA Reinsurance in particular, to share information with respect
to matters such as rate-setting, underwriting, and claims management. It is
not possible to predict the effect of such decisions or change in the law on
the operation of the Company.
Competition
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Reinsurers compete on the basis of many factors, including financial
strength, pricing and other terms and conditions of reinsurance agreements,
reputation, service, and experience in the types of business underwritten.
The U.S. and Canadian life reinsurance markets are served by numerous
international and domestic reinsurance companies. The Company believes that
RGA Reinsurance's largest competitors in the U.S. ordinary life reinsurance
market are currently Transamerica Occidental Life Insurance Company and
Lincoln National Corporation. However, within the reinsurance industry, this
can change from year to year. The Company believes that RGA Canada's major
competitors in the Canadian ordinary life reinsurance market are Swiss Re
Life Canada, The Mercantile and General Reinsurance Company of Canada, and
Munich Reinsurance Company of Canada.
The other international life operation competes with subsidiaries of
several U.S. individual and group life insurers and reinsurers and other
internationally-based insurers and reinsurers. Competition is primarily on
the basis of price, service, and financial strength.
Employees
- ---------
As of December 31, 1996, the Company had 338 employees located in the
United States, Canada, Argentina, Chile, United Kingdom, Hong Kong,
Australia, and Japan. None of these employees are represented by a labor
union. The Company believes that employee relations at all of its
subsidiaries are good.
9
10
C. Industry Segments
The Company obtains substantially all of its premium revenues through
reinsurance agreements that cover a portfolio of ordinary life insurance
products, including term life, credit life, universal life, whole life, and
joint and last survivor (JLS) insurance, as well as accident and health
insurance and direct premiums which include single premium pension annuities
and group life. Generally, the Company, through a subsidiary, has provided
reinsurance and to a lesser extent insurance for mortality and morbidity
risks associated with such products. With respect to universal life
products, the Company has also provided reinsurance for investment-related
risks. RGA Reinsurance also writes a small amount of primary insurance on
General American directors and officers, and a small amount of short term
life insurance.
The Company's reinsurance and insurance operations are classified into
four industry segments: U.S. ordinary life; Canadian ordinary life; accident
and health; and other international. Of the other international segment,
61.4% related to direct insurance based on 1996 net premiums. Revenue,
income (loss) before income taxes and minority interest, assets, and
aggregate depreciation and amortization attributable to each industry segment
for 1996, 1995, and 1994, are set forth in Note 13 of Notes to Consolidated
Financial Statements, which Note is hereby incorporated by reference.
10
11
The following table sets forth the Company's gross and net premiums
from new business and renewal business attributable to each of the industry
segments for the periods indicated:
New Business and Renewal Premiums by Segment
(dollars in millions)
Year Ended December 31,
-----------------------
1996 1995 1994
---------------- ---------------- -----------------
Amount % Amount % Amount %
------ --- ------ --- ------ ---
Gross Premiums:
New business:
U.S. ordinary life $143.2 65.8 $111.5 61.3 $83.1 71.9
Canadian ordinary life 14.7 6.7 9.8 5.4 8.1 7.0
Accident and health <F1> - - - - - -
Other international 60.0 27.5 46.4 33.3 24.4 21.1
------ ----- ------ ----- ------ -----
Subtotal 217.9 100.0 167.7 100.0 115.6 100.0
Renewals:
U.S. ordinary life 477.7 71.7 403.4 71.2 340.9 65.4
Canadian ordinary life 66.8 10.0 55.2 9.8 47.6 9.2
Accident and health <F1> 112.3 16.8 107.8 19.0 132.0 25.4
Other international 9.9 1.5 14.2 - - -
------ ----- ------ ----- ------ -----
Subtotal 666.7 100.0 580.6 100.0 520.5 100.0
Total:
U.S. ordinary life 620.9 70.2 514.9 68.8 424.0 66.6
Canadian ordinary life 81.5 9.2 65.0 8.7 55.7 8.8
Accident and health <F1> 112.3 12.7 107.8 14.4 132.0 20.8
Other international 69.9 7.9 60.6 8.1 24.4 3.8
------ ----- ------ ----- ------ -----
Total $884.6 100.0 $748.3 100.0 $636.1 100.0
====== ===== ====== ===== ====== =====
Net Premiums:
New Business:
U.S. ordinary life $103.2 58.8 $66.4 49.7 $73.1 71.3
Canadian ordinary life 14.4 8.2 8.4 6.3 6.8 6.6
Accident and health <F1> - - - - - -
Other international 58.0 33.0 46.2 44.0 22.6 22.1
------ ----- ------ ----- ------ -----
Subtotal 175.6 100.0 121.0 100.0 102.5 100.0
Renewals:
U.S. ordinary life 383.5 76.8 347.7 79.7 266.5 76.3
Canadian ordinary life 48.7 9.8 40.9 9.4 34.2 9.8
Accident and health <F1> 57.2 11.4 47.8 10.9 48.5 13.9
Other international 9.9 2.0 12.6 - - -
------ ----- ------ ----- ------ -----
Subtotal 499.3 100.0 449.0 100.0 349.2 100.0
Total:
U.S. ordinary life 486.7 72.1 414.1 72.7 339.6 75.2
Canadian ordinary life 63.1 9.3 49.3 8.6 41.0 9.1
Accident and health <F1> 57.2 8.5 47.8 8.4 48.5 10.7
Other international 67.9 10.1 58.8 10.3 22.6 5.0
------ ----- ------ ----- ------ -----
Total $674.9 100.0 $570.0 100.0 $451.7 100.0
====== ===== ====== ===== ====== =====
<FN>
<F1> The term "new business" is not applicable to the accident and health
segment, which generally writes reinsurance agreements with terms of one
year.
11
12
The following table sets forth selected information concerning assumed
reinsurance business in force for the Company's U.S., Canadian and other
international life segments for the indicated periods. (The term "in force"
refers to face amounts or net amounts at risk and is not applicable to the
accident and health segment.)
Reinsurance Business In Force by Segment
(dollars in billions)
Year Ended December 31,
-----------------------
1996 1995 1994
------------------ ------------------ ------------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
U.S. ordinary life $137.3 81.6 $127.9 83.1 $114.2 80.2
Canadian ordinary life 22.7 13.4 17.3 11.2 14.3 10.0
Other international life 8.3 5.0 8.7 5.7 13.9 9.8
------ ----- ------ ----- ------ -----
Total $168.3 100.0 $153.9 100.0 $142.4 100.0
====== ===== ====== ===== ====== =====
The following table sets forth selected information concerning assumed
new business volume for the Company's U.S., Canadian, and other international
life segments for the indicated periods. (The term "volume" refers to face
amounts or net amounts at risk and is not applicable to the accident and
health segment.)
New Business Volume by Segment
(dollars in billions)
Year Ended December 31,
-----------------------
1996 1995 1994
----------------- ----------------- -----------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
U.S. ordinary life $27.0 71.2 $27.7 76.9 $26.1 60.4
Canadian ordinary life 6.9 18.2 4.2 11.7 3.2 7.4
Other international life 4.0 10.6 4.1 11.4 13.9 32.2
----- ----- ----- ----- ----- -----
Total $37.9 100.0 $36.0 100.0 $43.2 100.0
===== ===== ===== ===== ===== =====
Reinsurance business in force reflects the addition or acquisition of
new reinsurance business, offset by terminations (e.g., voluntary surrenders
of underlying life insurance policies, lapses of underlying policies, deaths
of insureds, the exercise of recapture options, changes in foreign exchange,
and any other changes in the amount of insurance in force). As a result of
terminations, assumed in force amounts at risk of $23.5 billion, $24.5
billion, and $15.5 billion were released in 1996, 1995, and 1994,
respectively.
U.S. Ordinary Life Reinsurance
- ------------------------------
General
The Company's U.S. ordinary life reinsurance business, which totaled
72.1%, 72.7%, and 75.2%, of the Company's net premiums in 1996, 1995, and
1994, respectively, consists of the reinsurance of various types of life
insurance products. This business has been accepted under many different
rate scales, with rates often tailored to suit the underlying product and the
needs of the ceding company. Premiums typically vary for smokers and
non-smokers, males and females, and may include a preferred underwriting
class discount. Regardless of the premium mode for the underlying primary
insurance, reinsurance premiums are generally paid annually. This business
is made up of facultative and automatic treaty business.
In addition, several of the Company's U.S. clients have purchased life
insurance policies insuring the lives of their executives. These policies
have generally been issued to fund deferred compensation plans and have been
12
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reinsured with the Company. As of December 31, 1996, reinsurance of such
policies was reflected in interest sensitive contract reserves of $532.6
million, and policy loans of $426.1 million.
Facultative Business
The U.S. ordinary life facultative reinsurance operation involves the
assessment of the risks inherent in (i) multiple impairments, such as heart
disease, high blood pressure, and diabetes; (ii) cases involving large policy
face amounts; and (iii) financial risk cases, i.e., cases involving policies
disproportionately large in relation to the financial characteristics of the
proposed insured. The U.S. ordinary life operation's marketing efforts have
focused on developing facultative relationships with client companies because
management believes facultative reinsurance represents a substantial segment
of the reinsurance activity of many large insurance companies and has been an
effective means of expanding the U.S. ordinary life operation's automatic
business. In 1996, 1995, and 1994, approximately 39.2%, 38.3%, and 45.3%
respectively, of the U.S. ordinary life gross premiums were written on a
facultative basis. The U.S. ordinary life operation has emphasized
personalized service and prompt response to requests for facultative risk
assessment.
Only a portion of approved facultative applications result in paid
reinsurance. This is because applicants for impaired risk policies often
submit applications to several primary insurers, which in turn seek
facultative reinsurance from several reinsurers; ultimately, only one
insurance company and one reinsurer are likely to obtain the business. The
U.S. ordinary life operation tracks the percentage of declined and placed
facultative applications on a client-by-client basis and generally works with
clients to seek to maintain such percentages at levels the U.S. ordinary life
operation deems acceptable.
Mortality studies by RGA Reinsurance have shown that the U.S. ordinary
life operation's facultative mortality experience is comparable to its
automatic mortality experience relative to expected mortality rates. The
U.S. ordinary life operation attributes its favorable facultative mortality
experience to its experienced group of underwriters and its medical staff.
Because the U.S. ordinary life operation applies its underwriting standards
to each application submitted to it facultatively, the U.S. ordinary life
operation generally does not require ceding companies to retain any portion
of the underlying risk when business is written on a facultative basis.
Automatic Business
Automatic business, including financial reinsurance treaties, is
generated pursuant to treaties which generally require that the underlying
policies meet the ceding company's underwriting criteria, although a number
of such policies may be rated substandard. In contrast to facultative
reinsurance, reinsurers do not engage in underwriting assessments of the
risks assumed through an automatic treaty. Automatic business tends to be
very price-competitive; however, clients are likely to give favorable
consideration to their existing reinsurers.
Because RGA Reinsurance does not apply its underwriting standards to
each policy ceded to it under automatic treaties, the U.S. ordinary life
operation generally requires ceding companies to keep their full retention
when business is written on an automatic basis, thereby increasing the ceding
companies' incentives to underwrite risks with due care and, when
appropriate, to contest claims diligently.
Customer Base
The U.S. ordinary life reinsurance operation markets life reinsurance
primarily to the largest U.S. ordinary life insurance companies and currently
has treaties with most of the top 100 companies. These treaties generally
are terminable by either party on 90 days written notice, but only with
respect to future new business; existing business generally is not
terminable, unless the underlying policies terminate or are recaptured. In
1996, 28 clients had annual gross premiums of $5 million or more and the
aggregate gross premiums from these clients represented approximately 69.8%
of 1996 U.S. ordinary life gross premiums.
In 1996, no U.S. client accounted for more than 10% of the Company's
consolidated gross premiums and no single client accounted for more than 10%
of the Company's U.S. ordinary life gross premiums. Also, three
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14
clients ceded more than 5% of U.S. ordinary life gross premiums. Together
they ceded $127.4 million, or 20.5%, of U.S. ordinary life gross premiums
in 1996.
General American and its affiliates generated less than 5.5% of U.S.
ordinary life gross premiums in 1996, 1995, and 1994, exclusive of the
Retrocession Agreements.
During 1996, $222.7 million of U.S. ordinary life premium related to
facultative business. The U.S. ordinary life operations accepted new
facultative business from over 100 U.S. clients in 1996, and has been
receiving facultative business from these clients for an average of 10 years.
Underwriting
Facultative. Senior management has developed underwriting guidelines,
policies, and procedures with the objective of controlling the quality of
U.S. ordinary life business written as well as its pricing. The U.S.
ordinary life operation's underwriting process emphasizes close collaboration
among its underwriting, actuarial, and operations departments. Management
periodically updates these underwriting policies, procedures, and standards
to account for changing industry conditions, market developments, and changes
occurring in the field of medical technology; however, no assurance can be
given that all relevant information has been analyzed or that additional
risks will not materialize. These policies, procedures, and standards are
documented in an on-line underwriting manual.
The U.S. ordinary life operation determines whether to accept
facultative reinsurance business on a prospective insured by reviewing the
client company's applications and medical requirements, and assessing
financial information and any medical impairments. Most facultative
applications involve a prospective insured with multiple impairments, such as
heart disease, high blood pressure, and diabetes, requiring a difficult
underwriting assessment. To assist its underwriters in making this
assessment, the U.S. ordinary life operation employs two full-time and one
part-time medical directors.
Automatic. The U.S. ordinary life operation's management determines
whether to write automatic reinsurance business by considering many factors,
including the types of risks to be covered; the ceding company's retention
limit and binding authority, product, and pricing assumptions; and the ceding
company's underwriting standards, financial strength and distribution
systems. For automatic business, the U.S. ordinary life operation endeavors
to ensure that the underwriting standards and procedures of its ceding
companies are compatible with those of RGA. To this end, the U.S. ordinary
life operation conducts periodic reviews of the ceding companies'
underwriting and claims personnel and procedures. Approximately 10 client
audits are conducted each year.
Financial Reinsurance. The financial reinsurance provided by the
Company is repaid by the future profit stream associated with the reinsured
block of business. The Company structures its financial reinsurance
transactions so that the future profits of the underlying reinsured business
conservatively exceed the amount of surplus provided to the ceding company.
AIDS. Since 1987, the U.S. life insurance industry has implemented the
practice of antibody blood testing to detect the presence of HIV virus
associated with Acquired Immune Deficiency Syndrome (AIDS). Prior to the
onset of routine antibody testing, it was possible for applicants with AIDS
to purchase significant amounts of life insurance. Since 1987, the
guidelines used by the U.S. ordinary life operation have required ceding
companies to conduct HIV testing for life insurance risks at or above
$100,000.
The Company believes that the antibody test for AIDS is effective. No
assurance can be given, however, that additional AIDS-related death claims
involving insureds who test negative for AIDS at the time of underwriting
will not arise in the future. The Company believes that its primary exposure
to the AIDS risk is related to business issued before the onset of AIDS
antibody testing in 1987. Each year, this business represents a smaller
portion of RGA Reinsurance's reinsurance in force.
14
15
Risk Management
Prior to January 1, 1996, RGA Reinsurance's practice was to retain up
to $2 million of liability on any one life for U.S. ordinary life
reinsurance. Effective January 1, 1996, RGA Reinsurance increased this
retention limit to up to $2.5 million. RGA Reinsurance has a number of
retrocession arrangements whereby certain business in force is retroceded on
a quota share or facultative basis. All of the U.S. retrocessionaires under
such arrangements were rated "A" or better by A.M. Best as of December 31,
1995. RGA Reinsurance also retrocedes business to foreign reinsurers. In
these instances, additional security in the form of letters of credit or
trust assets have been given by such retrocessionaires as additional security
in favor of RGA Reinsurance.
RGA Reinsurance has never experienced a default in connection with its
retrocession arrangements, nor has it experienced any difficulty in
collecting claims recoverable from its retrocessionaires; however, no
assurance can be given as to the future performance of such retrocessionaires
or as to recoverability of any such claims.
RGA Reinsurance has catastrophe insurance coverage issued by an insurer
rated "A" by A.M. Best that provides benefits of up to $100 million per
occurrence for claims involving three or more deaths in a single accident,
with a deductible of $1.5 million per occurrence. This coverage is
terminable annually on 90 days notice and is ultimately provided through a
pool of 20 unaffiliated insurers. The Company believes such catastrophe
insurance coverage is adequate to protect the Company from the risks of
multiple deaths of lives reinsured by policies with RGA Reinsurance in a
single accident. However, deferred compensation plans of two large life
insurance companies reinsured by RGA Reinsurance cover aggregate amounts
substantially in excess of these limits.
Operations
During 1996, substantially all gross U.S. ordinary life business was
obtained directly, rather than through brokers. The U.S. ordinary life
operation has an experienced marketing staff which works to maintain existing
relationships and to provide responsive service.
The U.S. ordinary life operation's auditing and accounting department
is responsible for treaty compliance auditing, financial analysis of results,
generation of internal management reports, and periodic audits of
administrative practices and records. A significant effort is focused on
periodic audits of administrative and underwriting practices, records, and
treaty compliance of reinsurance clients.
The U.S. ordinary life operation's claims department (i) reviews and
verifies reinsurance claims, (ii) obtains the information necessary to
evaluate claims, (iii) determines the Company's liability with respect to
claims, and (iv) arranges for timely claims payments. Claims are subjected
to a detailed review process to ensure that the risk was properly ceded, the
claim complies with the contract provisions, and the ceding company is
current in the payment of reinsurance premiums to the U.S. ordinary life
operation. The claims department also investigates claims generally for
evidence of misrepresentation in the policy application and approval process.
In addition, the claims department monitors both specific claims and the
overall claims handling procedure of ceding companies.
Claims personnel work closely with their counterparts at client
companies to attempt to uncover fraud, misrepresentation, suicide, and other
situations where the claim can be reduced or eliminated. By law, the ceding
company cannot contest claims made after two years of the issuance of the
underlying insurance policy. By developing good working relationships with
the claims departments of client companies, major claims or problem claims
can be addressed early in the investigation process. Claims personnel review
material claims presented to RGA Reinsurance in detail to find potential
mistakes such as claims ceded to the wrong reinsurer and claims submitted for
improper amounts.
15
16
Canadian Ordinary Life Reinsurance
- ----------------------------------
Canadian ordinary life reinsurance business represented 9.3%, 8.6%, and
9.1%, of RGA's net premiums in 1996, 1995, and 1994, respectively. In 1996,
the Canadian ordinary life operation wrote $6.9 billion in new business.
Approximately 84% of the 1996 Canadian business was written on an automatic
basis.
Clients include all of Canada's principal life insurers and no clients
represented more than 10% of the Company's consolidated net premium in 1996.
The Canadian ordinary life operation competes with a small number of
individual and group life reinsurers. The Canadian ordinary life operation
competes primarily on the basis of price, service, and financial strength.
RGA Canada's policy is to retain up to C$100,000 of individual life and
up to C$100,000 of Accidental Death and Dismemberment liability on any one
life. RGA Canada retrocedes amounts in excess of its retention mostly to RGA
Reinsurance through General American in accordance with the U.S. Retrocession
Agreement. Retrocessions are arranged through RGA Reinsurance's retrocession
pool. RGA Canada has never experienced a default in connection with its
retrocession arrangements, nor has it experienced any difficulty in
collecting claims recoverable from its retrocessionaires. However, no
assurance can be given as to the future performance of such retrocessionaires
or as to the recoverability of any such claims.
In 1987, the Canadian life insurance industry implemented the practice
of antibody blood testing to detect the presence of the HIV virus associated
with AIDS. Prior to the onset of routine antibody testing, it was possible
for applicants with AIDS to purchase significant amounts of life insurance.
Since 1987, the accepted industry practice is to conduct HIV testing for life
insurance risks over C$100,000. Accordingly, RGA Canada believes that its
main exposure to the AIDS risk is related to business issued before the onset
of AIDS antibody testing in 1987. As of December 31, 1996, approximately 16%
of the Company's Canadian reinsurance in force was issued prior to 1988.
RGA Canada maintains a staff of forty-two people at the Montreal office
and twelve people in an office in Toronto. RGA Canada employs its own
underwriting, actuarial, claims, pricing, accounting, systems, marketing and
administrative staff.
RGA's Canadian ordinary life reinsurance business was originally
conducted by General American. General American entered the Canadian
ordinary life reinsurance market in 1978 and was primarily engaged in the
retrocession business, writing only a small amount of business with primary
Canadian insurers. In April 1992, General American, through RGA Canada,
purchased the life reinsurance assets and business of National Reinsurance
Company of Canada ("National Re"), including C$26.0 million of Canadian
ordinary life reinsurance gross in force premiums. National Re had been
engaged in the life reinsurance business in Canada since 1972, writing
reinsurance on a direct basis with primary Canadian insurers. Accordingly,
this acquisition represented a significant expansion of General American's
Canadian life reinsurance business.
Accident and Health Reinsurance
- -------------------------------
In 1987, the Company began reinsuring accident and health risks on both
a group and individual basis. The Company's accident and health reinsurance
business represented 8.5%, 8.4%, and 10.7% of the Company's net premiums in
1996, 1995, and 1994, respectively.
The Company principally reinsures stop-loss medical insurance and
accident insurance providing benefits for death, disability, and
dismemberment. Unlike ordinary life reinsurance, most accident and health
reinsurance is short-term in nature. The majority of such insurance is
subject to renegotiation or cancellation on an annual basis. Accordingly,
increasing health care costs generally do not have a significant adverse
effect on the profitability of accident and health reinsurance agreements.
A large portion of the Company's accident and health reinsurance
business is accepted through participation in reinsurance pools. The Company
generally pursues a strategy of following an underwriting
16
17
manager, which is responsible for negotiating the price and terms of
reinsurance with the ceding company. However, in certain cases, the Company
sets the price and terms of the risks it reinsures.
Accident and health reinsurance is written on both a facultative and
treaty basis. Also, coverage provided can be through either a quota-share
treaty or an excess-basis treaty. Generally, the Company retains not more
than $500,000 of risk on one person, although it occasionally writes up to $1
million of risk on one person. The Company retains not more than $5 million
of risk per occurrence, per contract involving multiple insureds. The
Company typically retrocedes amounts in excess of these limits to certain
underwriters of Lloyd's of London, either through Great Rivers Reinsurance
Management, which has certain binding authority from such underwriters, as
described below, or on a facultative basis.
The Company markets its accident and health reinsurance to a broad
cross-section of primary insurers, which vary in size, corporate structure,
and geographic location, but which are generally smaller than the primary
insurers in the Company's U.S. ordinary life reinsurance business. Most of
the Company's accident and health reinsurance business is generated by
reinsurance intermediaries who are compensated on a commission basis. The
Company's accident and health reinsurance business competes with other
reinsurers and with reinsurance management pools.
Since October 1992, Great Rivers Reinsurance Management has
underwritten accident and health risks on behalf of General American. Since
January 1, 1993, accident and health reinsurance written by General American
has been retroceded to RGA Reinsurance pursuant to the U.S. Retrocession
Agreement. Pursuant to a management agreement that can be terminated
annually by either party, Great Rivers Reinsurance Management has the
authority to bind RGA Reinsurance or General American to reinsurance risks
subject to underwriting standards have been established by RGA Reinsurance
and General American. Great Rivers Reinsurance Management employs three
underwriters and occasionally consults with RGA Reinsurance regarding certain
cases. Great Rivers Reinsurance Management receives a commission for each
risk it underwrites and may receive additional compensation based on the
profitability of the business underwritten.
Great Rivers Reinsurance Management is not required to, and does not,
operate exclusively for the Company. Currently, it also has authority from
certain underwriters at Lloyd's of London to bind such underwriters to
certain types of accident and health reinsurance risks, including certain
risks suitable for the Company, up to $5 million per person and up to $30
million per occurrence.
Other International Reinsurance
- -------------------------------
Beginning in 1994, the Company initiated various international
initiatives that continued to develop during 1996. In Chile, the Company is
represented by a 50% investment in BHIF America, a Chilean insurance company,
and a 100% investment in RGA Chile, a life reinsurance company. The Company
owns 100% of Manantial, an Argentine insurance company. In addition, RGA
Reinsurance has provided reinsurance on mortality risk reinsurance associated
with the privatization of the Argentine pension system. The Company has a
presence in the Asia Pacific region with a licensed branch office in Hong
Kong and a representative office in Tokyo. The Company also established
subsidiary companies in Australia in January 1996: Australian Holdings, a
wholly-owned holding company, and RGA Australia, a wholly-owned life
reinsurance company. In addition, RGA Reinsurance provides direct
reinsurance to several companies within the Asia Pacific region. Other
international life reinsurance business represented 10.1%, 10.3%, and 5.0% of
the Company's consolidated net premiums in 1996, 1995, and 1994,
respectively. No single client in the other international segment
represented more than 10% of the Company's consolidated net premium for 1996.
For other international business, RGA Reinsurance retains up to $1.25
million for Asia Pacific business and foreign-currency denominated Latin
American business with up to $2.5 million retained for Latin American U.S.
currency-denominated business. The Chilean subsidiaries have a policy of
ceding business in excess of approximately $22,000, while the Argentine
subsidiary cedes business in excess of $40,000. RGA Australia has a
retrocession arrangement with RGA Reinsurance in which risks above $100,000
Australian dollars are retroceded to
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RGA Reinsurance. On an aggregate basis amongst all of its subsidiaries, the
Company does not retain more than $2.5 million on any one life.
BHIF America and RGA Chile maintain staffing of twenty-five people at
the head offices in Santiago, Chile. Manantial maintains a staff of
twenty-four people in Buenos Aires, Argentina. These subsidiaries employ
their own underwriting, actuarial, claims, pricing, accounting, systems,
marketing and administrative staff. Within Asia Pacific, five people were on
staff in the Hong Kong office, four people were on staff in the Tokyo office,
and RGA Australia maintained a staff of seven people in Sydney. The Hong
Kong and Tokyo offices primarily provide marketing and underwriting service
to the direct life insurance companies with other service support provided
directly by RGA Reinsurance operations.
RGA Australia directly maintains its own underwriting, actuarial,
claims, pricing, accounting, systems, marketing and administration service
with additional support provided by RGA Reinsurance operations.
D. Financial Information About Foreign Operations
The Company's foreign operations are primarily in Canada, Latin
America, and the Asia Pacific region which includes Australia. Revenue,
income (loss) which includes net realized gains (losses) before income tax
and minority interest, and identifiable assets attributable to these
geographic regions are identified in the following table:
Financial information Relating to Foreign Operations
(dollars in millions)
1996 1995 1994
Revenues:
Canada $ 78.5 $ 60.3 $ 50.2
Latin America 52.0 49.1 19.6
Asia Pacific 22.0 12.5 4.1
------ ------ ------
Total $152.5 $121.9 $ 73.9
====== ====== ======
Income (loss):
Canada $ 13.4 $ 10.9 $ 6.8
Latin America 2.1 3.5 .2
Asia Pacific (4.4) (1.7) (.3)
------ ------ ------
Total $ 11.1 $ 12.7 $ 6.7
====== ====== ======
Total Assets:
Canada $321.3 $247.4 $177.2
Latin America 128.0 80.1 34.5
Asia Pacific 41.8 20.0 3.3
------ ------ ------
Total $491.1 $347.5 $215.0
====== ====== ======
E. Executive Officers of the Registrant
For information regarding the executive officers of the Company, see
Part III, Item 10, entitled "Directors and Executive Officers of the
Registrant."
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Item 2. PROPERTIES
RGA Reinsurance houses its employees and the majority of RGA's officers
in 71,994 square feet of office space at 660 Mason Ridge Center Drive, St.
Louis County, Missouri. These premises are leased from General American for
an initial term ending August 31, 1998, at an annual rent of $1,538,872, plus
a pro-rated share of increases in taxes and operating expenses for the
building beyond the levels of 1995. A portion of this office space is
subleased to subsidiaries and affiliates: Great Rivers Reinsurance
Management, Re Partners, and RGA/Swiss Financial Group.
RGA Reinsurance conducts business from approximately 1,800 square feet
of office space located in Hong Kong and approximately 1,200 square feet of
office space located in Tokyo, Japan. The rental expenses paid by RGA
Reinsurance under the leases during 1996 were approximately $162,100 and
$42,800 for Hong Kong and Tokyo, respectively. RGA Australia conducts
business from approximately 1,800 square feet of office space located in
Sydney, Australia and paid $41,600 during 1996 for lease expense. The Hong
Kong and Tokyo leases expire in 1998 and the Sydney lease expires in December
1997.
Manantial conducts business from approximately 8,400 square feet of
office space in Buenos Aires, Argentina, pursuant to several leases. Rental
expense paid for the office was approximately $138,700 during 1996. BHIF
America and RGA Chile conduct business from approximately 3,400 square feet
of office space in Santiago, Chile. The lease expense paid during 1996 was
approximately $35,500. Two of the Buenos Aires leases expire in October and
November 1997 with the remaining leases expiring in 1999. The Santiago lease
expires in April 1997.
RGA Canada's operations are conducted from approximately 9,800 square
feet of office space located in Montreal, Canada. The lease with respect to
such space expires in 2010. Rental expenses paid by RGA Canada under the
lease during 1996 were approximately $175,600. RGA Canada also leases
approximately 5,900 square feet of space in Toronto, Canada. This lease
expires in 1998. The rental expenses paid by RGA Canada under the Toronto
lease during 1996 were approximately $126,500.
Item 3. LEGAL PROCEEDINGS
From time to time, subsidiaries of RGA are subject to
reinsurance-related litigation and arbitration in the normal course of
business. Management does not believe that any such pending litigation or
arbitration would have a material adverse effect on RGA's future operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters that were submitted to a vote of security holders
during the fourth quarter of 1996.
Part II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information on this subject is incorporated by reference to the Annual
Report for 1996 under the caption "Quarterly Data (Unaudited)" at page 49.
Dividend Policy
- ---------------
RGA began paying a dividend of $0.06 per share each quarter, starting
in August 1993. In August 1995, the dividend was raised to $0.07 per share
and to $0.08 per share in August 1996. It is expected that payments at this
level will continue. However, all future payments of dividends are at the
discretion of the Company's Board of
19
20
Directors and will depend on the Company's earnings, capital requirements,
insurance regulatory conditions, operating conditions, and such other factors
as the Board of Directors may deem relevant. The amount of dividends that the
Company can pay will depend in part on the operations of its reinsurance
subsidiaries. The transfer of funds from the insurance subsidiaries to RGA is
subject to applicable insurance laws and regulations.
Reinsurance companies are subject to statutory regulations which
restrict the payment of dividends. In the case of RGA Reinsurance, Missouri
regulations impose a limit of the greater of 10% of statutory capital and
surplus or statutory operating income, both as of the end of the preceding
year. Any dividend proposed by RGA Reinsurance in excess of these measures
would, under Missouri law, be "extraordinary" and subject to review by the
Missouri Director of Insurance. See "Business -- Corporate Structure --
Regulation."
Item 6. SELECTED FINANCIAL DATA
These data are found at page 48 in the Annual Report for 1996 under the
caption "Selected Consolidated Financial and Operating Data" which section is
incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis is incorporated by reference to the Annual
Report for 1996 under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" at pages 13 to 22.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is incorporated by reference to the Annual Report for
1996 under the following captions:
Page of Annual
Index Report
----- ------
Consolidated Balance Sheets 23
Consolidated Statements of Income 24
Consolidated Statements of
Stockholders' Equity 25
Consolidated Statements of Cash Flows 26
Notes to Consolidated Financial Statements 27-45
Independent Auditors' Report 46
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is incorporated by
reference to the Proxy Statement under the captions "Nominees and Continuing
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance."
The Proxy Statement will be filed pursuant to Regulation 14A within 120 days
of the end of the Company's fiscal year.
20
21
The following is certain additional information concerning each
executive officer of the Company who is not also a director. With the
exception of Mr. McCauley and Mr. St-Amour, each individual holds the same
position at RGA and RGA Reinsurance.
David B. Atkinson is Executive Vice President and Chief Operating
Officer. Prior to the formation of RGA, Mr. Atkinson served as Reinsurance
Operations Vice President of General American. Mr. Atkinson joined General
American in 1987 as Second Vice President and was promoted to Vice President
later the same year. Prior to joining General American, he served as Vice
President and Actuary of Atlas Life Insurance Company from 1981 to 1987, as
Chief Actuarial Consultant at Cybertek Computer Products from 1979 to 1981,
and in a variety of actuarial positions with Occidental Life Insurance
Company of California from 1975 to 1979. Mr. Atkinson also serves as a
director and officer of certain RGA subsidiaries.
Bruce E. Counce is Executive Vice President and Chief Corporate
Operating Officer. Prior to the formation of RGA, Mr. Counce served as
Reinsurance Sales and Marketing Vice President for General American. After
joining General American in 1967, Mr. Counce joined the Reinsurance Division
in 1980 in a sales capacity and held a series of increasingly responsible
positions leading to his current position. Mr. Counce also serves as a
director and officer of certain of RGA's subsidiaries.
Jack B. Lay is Executive Vice President and Chief Financial Officer.
Prior to joining the Company in 1994, Mr. Lay served as Second Vice President
and Associate Controller at General American. In that position, he was
responsible for all accounting and external financial reporting as well as
merger and acquisition support. Before joining General American in 1991, Mr.
Lay was a partner in the financial services practice with the St. Louis
office of KPMG Peat Marwick LLP. Mr. Lay also serves as a director and
officer of certain RGA subsidiaries.
Graham S. Watson is Executive Vice President and Chief Marketing
Officer. Upon joining RGA in 1996, Mr. Watson was President and CEO of RGA
Australia. Prior to joining RGA in 1996, Mr. Watson was the President and
CEO of Intercedent Limited in Canada and has held various positions of
increasing responsibility for other life insurance companies. Mr. Watson
also serves as a director and officer of certain RGA subsidiaries.
Brendan J. Galligan is Senior Vice President, Asia Pacific Division.
Prior to joining RGA, Mr. Galligan was Senior Vice President of RGA Canada,
and its predecessor, National Re, for five years. His insurance and
reinsurance career commenced in Canada in 1977.
Joel S. Iskiwitch is Senior Vice President, Accident and Health
Division. In 1995, Mr. Iskiwitch joined Great Rivers Reinsurance, a
subsidiary of RGA, as a participant in General American's Management Rotation
Program. Prior to joining Great Rivers and RGA, Mr. Iskiwitch held the
position of Vice President of Business Markets and Advanced Underwriting for
GenMark/Individual Line at General American. Since joining General American
in 1988, Mr. Iskiwitch has held a series of responsible positions leading to
his current position at RGA.
Paul Nitsou is Senior Vice President, Market Development Division.
Prior to joining RGA in 1996, Mr. Nitsou was Vice President, Reinsurance for
Manulife Financial. Mr. Nitsou joined RGA in 1996 as Vice President, Market
Development and was later promoted within his first year of employment to
Senior Vice President, Market Development Division.
Paul A. Schuster is Senior Vice President, U.S. Division. Prior to the
formation of RGA, Mr. Schuster served as Second Vice President and
Reinsurance Actuary of General American. Prior to joining General American
in 1991, he served as Vice President and Assistant Director of Reinsurance
Operations of the ITT Lyndon Insurance Group from 1988 to 1991, and in a
variety of actuarial positions with General Reassurance Corporation from 1976
to 1988.
Kenneth D. Sloan is Senior Vice President, U.S. Facultative Division.
Prior to the formation of RGA, Mr. Sloan served as Second Vice President of
Reinsurance Underwriting for General American. Mr. Sloan joined General
American in 1968 in an underwriting capacity and held a series of
increasingly responsible positions leading to his current position.
21
22
Todd C. Larson is Vice President & Controller. Mr. Larson previously
was Assistant Controller at Northwestern Mutual Life Insurance Company from
1994 through 1995 and prior to this position he was a Senior Manager for KPMG
Peat Marwick LLP through 1993.
Matthew P. McCauley is General Counsel and Secretary of the Company.
Mr. McCauley has served as Associate General Counsel of General American
since 1985 and is a director and officer of General American Capital Company
and an officer of The Walnut Street Funds, Inc., both of which are registered
investment companies affiliated with General American. He serves as a
director or officer of a number of General American subsidiaries, including
Conning Asset Management Company, formerly known as General American
Investment Management Company, a registered investment advisor, and Walnut
Street Securities, Inc., a registered broker/dealer.
Andre St-Amour is President and Chief Executive Officer of RGA Canada
and Chief Agent for the General American Life Insurance Company Canadian
Branch. Prior to January 1995, he was President and Chief Operating Officer.
Mr. St-Amour joined RGA Canada in 1992 when the company acquired the
reinsurance business of National Re. Mr. St-Amour served as Executive Vice
President, Life Division, of National Re from 1989 to 1991, and in various
actuarial positions.
Item 11. EXECUTIVE COMPENSATION
Information on this subject is included by reference to the Proxy
Statement under the captions "Executive Compensation" and "Nominees and
Continuing Directors." The Proxy Statement will be filed pursuant to
Regulation 14A within 120 days of the end of the Company's fiscal year.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information on this subject is incorporated by reference to the Proxy
Statement under the caption "Common Stock Ownership of Management and Certain
Beneficial Owners." The Proxy Statement will be filed pursuant to Regulation
14A within 120 days of the end of the Company's fiscal year.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on this subject is incorporated by reference to the Proxy
Statement under the caption "Certain Relationships and Related Transactions."
The Proxy Statement will be filed pursuant to Regulation 14A within 120 days
of the end of the Company's fiscal year.
22
23
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated statements are incorporated by reference to
the Annual Report for 1996 under the following captions:
Index Page
- ----- ----
Consolidated Balance Sheets 23
Consolidated Statements of Income 24
Consolidated Statements of
Stockholders' Equity 25
Consolidated Statements of Cash Flows 26
Notes to Consolidated Financial Statements 27-45
Independent Auditors' Report 46
2. Schedules, Reinsurance Group of America, Incorporated and
Subsidiaries
Schedule Page
- -------- ----
I Summary of Investments 23
III Supplementary Insurance Information 24
IV Reinsurance 25
V Valuation and Qualifying Accounts 26
All other schedules specified in Regulation S-X are omitted for the
reason that they are not required, are not applicable, or that equivalent
information has been included in the consolidated financial statements, and
notes thereto, incorporated by reference to the Annual Report for 1996.
3. Exhibits
See the Index to Exhibits on page 30.
(b) No reports on Form 8-K were filed during the fourth quarter of 1996.
23
24
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Reinsurance Group of America, Incorporated:
Under date of February 7, 1997, we reported on the consolidated balance
sheets of Reinsurance Group of America, Incorporated and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996, as contained in the 1996 annual
report to stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form
10-K for the year 1996. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedules as listed in the accompanying index. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
February 7, 1997
24
25
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE I--SUMMARY OF INVESTMENTS--OTHER THAN
INVESTMENTS IN RELATED PARTIES
December 31, 1996
(in millions)
Amount at
which
shown in
Fair the Balance
Type of Investment Cost Value<F3> Sheets<F1><F3>
------------------ -------- ---------- --------------
Fixed maturities:
Bonds:
United States Government and government agencies and
authorities $ 66.2 $ 66.3 $ 66.3
Foreign governments <F2> 195.4 231.1 231.1
Public utilities 76.7 78.0 78.0
All other corporate bonds 1,131.3 1,141.9 1,141.9
-------- -------- --------
Total fixed maturities 1,469.6 1,517.3 1,517.3
-------- -------- --------
Equity securities:
Common stocks--
Industrial, miscellaneous and all other 6.0 6.0 6.0
-------- -------- --------
Total equity securities 6.0 6.0 6.0
-------- -------- --------
Mortgage loans on real estate 98.2 XXX 98.2
Policy loans 426.4 XXX 426.4
Funds withheld at interest 129.9 XXX 129.9
Short-term investments 93.5 XXX 93.5
Other .7 XXX .7
-------- --------
Total investments $2,224.3 XXX $2,272.0
======== ========
<FN>
<F1> Fixed maturities are classified as available for sale and carried
at fair value.
<F2> The following exchange rates have been used to convert foreign
securities to U.S. dollars:
Canadian dollar $0.7297/C$1.00
Argentina dollar $1.00/A$1.00
Chilean Peso $ .0024/$1.00 Peso
<F3> Fair value represents the closing sales prices of marketable
securities. Estimated fair values for private placement securities
are based on the credit quality and duration of marketable
securities deemed comparable by the Company, which may be of
another issuer.
25
26
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE III - - Supplementary Insurance Information
(in Thousands)
as of December 31,
--------------------------------------------------------------------------------------
Deferred Future Policy Other Policy
Policy Acquisition Benefits, Claims and
Costs Losses and Claims Benefits Payable
--------------------------- ------------------------- -------------------------
Assumed Ceded Assumed Ceded Assumed Ceded
------- ----- ------- ----- ------- -----
1994
U.S. Ordinary Life $120,663 (5,452) 750,716 (40,661) 94,411 (28,759)
Canadian Ordinary Life 34,717 (60) 109,281 (22,970) 5,431 (2,448)
Accident and Health 1,455 0 6,447 0 57,671 (22,435)
Other International 5,836 0 10,734 0 9,254 (1,243)
--------------------------- ---------------------------- --------------------------
Total $162,671 (5,512) 877,178 (63,631) 166,767 (54,885)
============ ========== ============= =========== =========== ===========
1995
U.S. Ordinary Life $132,300 (4,961) 1,010,142 (52,659) 114,625 (10,556)
Canadian Ordinary Life 41,614 (336) 138,707 (29,079) 9,712 (3,671)
Accident and Health 651 (5) 7,931 (76) 60,973 (23,660)
Other International 17,551 (1) 43,829 (3) 22,363 (2,570)
--------------------------- ---------------------------- --------------------------
Total $192,116 (5,303) 1,200,609 (81,817) 207,673 (40,457)
============ ========== ============= =========== =========== ===========
1996
U.S. Ordinary Life $160,737 (7,182) 1,578,172 (52,754) 111,257 (5,342)
Canadian Ordinary Life 52,039 (1,220) 184,800 (35,366) 11,390 (4,094)
Accident and Health 848 (11) 10,866 (252) 60,485 (20,228)
Other International 28,354 0 88,446 (3) 23,152 (2,772)
--------------------------- ---------------------------- --------------------------
Total $241,978 (8,413) 1,862,284 (88,375) 206,284 (32,436)
============ ========== ============= =========== =========== ===========
Years Ended December 31,
-------------------------------------------------------------------------
Net Benefits, Other
Premium Investment Claims Amortization Operating
Income Income and Losses of DAC Expenses
------ ------ ---------- ------ --------
1994
U.S. Ordinary Life $339,653 61,088 (269,581) (24,902) (44,603)
Canadian Ordinary Life 41,027 9,019 (29,535) (3,247) (10,563)
Accident and Health 48,463 98 (39,845) (6,836) (8,490)
Other International 22,597 1,098 (19,294) (758) (3,768)
------------------------------------------------------------------------
Total $451,740 71,303 (358,255) (35,743) (67,424)
============ =========== ============ =========== ============
1995
U.S. Ordinary Life $414,132 75,518 (345,765) (31,875) (57,082)
Canadian Ordinary Life 49,248 11,064 (36,683) (2,176) (10,576)
Accident and Health 47,789 730 (33,640) (6,827) (9,083)
Other International 58,821 2,805 (47,779) (454) (11,573)
------------------------------------------------------------------------
Total $569,990 90,117 (463,867) (41,332) (88,314)
============ =========== ============ =========== ============
1996
U.S. Ordinary Life $486,717 116,952 (414,643) (33,921) (89,996)
Canadian Ordinary Life 63,118 12,722 (49,270) (1,603) (14,240)
Accident and Health 57,182 1,019 (42,250) (15,888) (4,851)
Other International 67,868 6,135 (54,282) (575) (21,449)
------------------------------------------------------------------------
Total $674,885 136,828 (560,445) (51,987) (130,536)
============ =========== ============ =========== ============
26
27
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE IV - - Reinsurance
(in Millions)
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed to
Amount Companies Companies Amount Net
------ --------- --------- ------ ---
1994
Life insurance in force $98 $20,748 $142,374 $121,724 116.97%
Premiums
U.S. Ordinary Life $1.9 $84.4 $422.1 $339.6 124.29%
Canadian Ordinary Life - 14.7 55.7 41.0 135.85%
Accident and Health - 83.5 132.0 48.5 272.16%
Other International Operations 10.2 1.8 14.2 22.6 62.83%
--------------------------------------------------------
Total $12.1 $184.4 $624.0 $451.7 138.14%
========= ========== ========== ========== =========
1995
Life insurance in force $85 $25,275 $153,860 $128,670 119.58%
Premiums
U.S. Ordinary Life $2.6 $100.7 $512.3 $414.2 123.68%
Canadian Ordinary Life - 15.8 65.0 49.2 132.11%
Accident and Health - 60.0 107.8 47.8 225.52%
Other International Operations 33.8 1.8 26.8 58.8 45.58%
--------------------------------------------------------
Total $36.4 $178.3 $711.9 $570.0 124.89%
========= ========== ========== ========== =========
1996
Life insurance in force $85 $39,050 $168,339 $129,374 130.12%
Premiums
U.S. Ordinary Life $2.5 $134.2 $618.4 $486.7 127.06%
Canadian Ordinary Life - 18.4 81.5 63.1 129.16%
Accident and Health - 55.0 112.2 57.2 196.15%
Other International Operations 41.7 2.0 28.2 67.9 41.53%
--------------------------------------------------------
Total $44.2 $209.6 $840.3 $674.9 124.51%
========= ========== ========== ========== =========
27
28
REINSURANCE GROUP OF AMERICA, INCORPORATED
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996
(in millions)
Additions
------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts - Deductions - End
Description of Period Expenses Describe Describe of Period
- ----------------------------------- ---------- ---------- ---------------- ------------ ----------
Mortgage loan valuation allowance $ - $ 0.3 $ - $ - $ 0.3
---------- ---------- ---------------- ------------ ----------
Total $ - $ 0.3 $ - $ - $ 0.3
========== ========== ================ ============ ==========
28
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Reinsurance Group of America, Incorporated.
By: /s/ A. Greig Woodring March 24, 1997
-------------------------------------------
A. Greig Woodring
President
Date: March 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities indicated on March 24, 1997.
Signatures Title
---------- -----
/s/ Richard A. Liddy March 24, 1997 <F*> Chairman of the Board and
- ------------------------------------------------------ Director
Richard A. Liddy
/s/ A. Greig Woodring March 24, 1997 <F*> President and Director
- ------------------------------------------------------
A. Greig Woodring
/s/ J. Cliff Eason March 24, 1997 <F*> Director
- ------------------------------------------------------
J. Cliff Eason
/s/ Bernard A. Edison March 24, 1997 <F*> Director
- ------------------------------------------------------
Bernard A. Edison
/s/ Dennis F. Hardcastle March 24, 1997 <F*> Director
- ------------------------------------------------------
Dennis F. Hardcastle
/s/ William A. Peck, M.D. March 24, 1997 <F*> Director
- ------------------------------------------------------
William A. Peck, M.D.
/s/ Leonard M. Rubenstein March 24, 1997 <F*> Director
- ------------------------------------------------------
Leonard M. Rubenstein
/s/ William P. Stiritz March 24, 1997 <F*> Director
- ------------------------------------------------------
William P. Stiritz
/s/ Edwin Trusheim March 24, 1997 <F*> Director
- ------------------------------------------------------
H. Edwin Trusheim
/s/ Jack B. Lay March 24, 1997 <F*> Executive Vice President
- ------------------------------------------------------ (Principal Financial and Accounting
Jack B. Lay Officer)
<FN>
<F*>Original power of attorney authorizing Jack B. Lay to sign the Form 10-K
for the year ended December 31, 1996, filed by Reinsurance Group of America,
Incorporated with the Securities and Exchange Commission are filed herewith
as Exhibits.
29
30
Index to Exhibits
Source
Exhibit (See footnotes
Number Description that follow)
------ ----------- --------------
2.1 Reinsurance Agreement dated as of December 31, 1992 <F2>
between General American Life Insurance Company
("General American") and General American Life
Reinsurance Company of Canada ("RGA Canada")
2.2 Retrocession Agreement dated as of <F2>
July 1, 1990 between General American and
The National Reinsurance Company of Canada,
as amended between RGA Canada and General American
on December 31, 1992
2.3 Reinsurance Agreement dated as of <F2>
January 1, 1993 between RGA Reinsurance
Company ("RGA Reinsurance", formerly "Saint Louis
Reinsurance Company") and General American
3.1 Restated Articles of Incorporation of Reinsurance <F1>
Group of America, Incorporated ("RGA")
3.2 Bylaws of RGA <F1>
3.3 Form of Certificate of Designations for Series A <F2>
Junior Participating Preferred Stock (included as
Exhibit A to Exhibit 4.2)
4.1 Form of Specimen Certificate for Common Stock of RGA <F2>
4.2 Form of Rights Agreement between RGA and Boatmen's <F2>
Trust Company, as Rights Agent
10.1 Marketing Agreement dated as of January 1, 1993 <F3>
between RGA Reinsurance and General American
10.2 Tax Allocation Agreement dated October 30, 1992 <F2>
between RGA Reinsurance and General American
10.3 Tax Allocation Agreement dated as of January 15, 1993 <F2>
among RGA, RGA Reinsurance, and General American
10.4 Tax Sharing Agreement dated as of January 15, 1993 <F2>
among RGA, RGA Reinsurance, and General American
10.5 Administrative Services Agreement dated as of <F3>
January 1, 1993 between RGA and General American
10.6 Administrative Services Agreement dated as of <F3>
January 1, 1993 between RGA Reinsurance
and General American
30
31
Source
Exhibit (See footnotes
Number Description that follow)
------ ----------- --------------
10.7 Management Agreement dated as of January 1, 1993 <F2><F*>
between RGA Canada and General American
10.8 Investment Advisory Agreement dated as of <F3>
January 1, 1993 between RGA and Conning Asset
Management Company, formerly General American
Investment Management Company ("CAM")
10.9 Investment Advisory Agreement dated as of <F3>
January 1, 1993 between RGA Reinsurance
and CAM
10.10 Lease Agreement dated as of May 17, 1993 between <F4>
RGA and General American and Assignment to RGA
Reinsurance
10.11 Standard Form of General American Automatic <F2>
Agreement
10.12 Standard Form of General American Facultative <F2>
Agreement
10.13 Standard Form of General American Automatic and <F2>
Facultative YRT Agreement
10.14 Shareholders' Agreement dated as of November 24, 1992 <F3><F*>
among General American, Fairfield Holding,
Adrian N. Baker II, Richard H. Chomeau, and
Anthony J. Sutcliffe, as amended with RGA and
RGA Reinsurance
10.15 Shareholders' Agreement dated as of March 20, 1992 <F3><F*>
among General American, G.A. Canadian Holdings, Ltd.,
Penta-Life Group Inc., Claude M. Genest, Brendan
Galligan, Graham Watson, Societe FSA 50 Inc., Aenigma
Holdings Limited, Andre St-Amour, and Andre Primeau,
as amended with RGA
10.16 Registration Rights Agreement dated as of <F2>
April 15, 1993 between RGA and General American
10.17 RGA Reinsurance Management Incentive Plan --<F*>
10.18 RGA Reinsurance Management Deferred <F2><F*>
Compensation Plan (ended January 1, 1995)
10.19 RGA Reinsurance Executive Deferred <F2><F*>
Compensation Plan (ended January 1, 1995)
31
32
Source
Exhibit (See footnotes
Number Description that follow)
------ ----------- --------------
10.20 RGA Reinsurance Executive Supplemental <F2><F*>
Retirement Plan (ended January 1, 1995)
10.21 RGA Reinsurance Augmented Benefit Plan <F2><F*>
(ended January 1, 1995)
10.22 RGA Flexible Stock Plan --<F*>
10.23 Form of Directors' Indemnification Agreement <F2>
10.24 RGA Executive Performance Share Plan --<F*>
13.1 Portions of Annual Report to Shareholders for
1996 incorporated by reference in the
Form 10-K --
21.1 Subsidiaries of RGA --
23.1 Consent of KPMG Peat Marwick LLP --
24.1 Powers of Attorney for Messrs. Eason, Edison, Peck --
Hardcastle, Liddy, Rubenstein, Stiritz, and Trusheim
27.1 Financial Data Schedule --
<FN>
<F1> Documents incorporated by reference to Registration
Statement on Form S-1 (No. 33-58960) filed on 2 March
1993 at the corresponding exhibit.
<F2> Documents incorporated by reference to Amendment
No. 1 to Registration Statement on Form S-1
(No. 33-58960), filed on 14 April 1993 at the
corresponding exhibit.
<F3> Documents incorporated by reference to Amendment
No. 2 to Registration Statement on Form S-1
(No. 33-58960), filed on 29 April 1993 at the
corresponding exhibit.
<F4> Documents incorporated by reference to Form 10-K
for fiscal year ended December 31, 1993 filed
March 29, 1994 at the corresponding exhibit.
<F*> Represents a management contract or compensatory
plan or arrangement required to be filed as an exhibit
to this form pursuant to Item 14(C) of this Part IV.
32