REINSURANCE GROUP OF AMERICA INC – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 including, among others,
statements relating to projections of the future operations, strategies,
earnings, revenues, income or loss, ratios, financial performance and growth
potential of the Company. Forward-looking statements often contain words and
phrases such as "intend," "expect," "project," "estimate," "predict,"
"anticipate," "should," "believe" and other similar expressions. Forward-looking
statements are based on management's current expectations and beliefs concerning
future developments and their potential effects on the Company. Forward-looking
statements are not a guarantee of future performance and are subject to risks
and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results, performance, and achievements could differ materially
from those set forth in, contemplated by or underlying the forward-looking
statements.
The effects of the COVID-19 pandemic and the response thereto on economic
conditions, the financial markets and insurance risks, and the resulting effects
on the Company's financial results, liquidity, capital resources, financial
metrics, investment portfolio and stock price, could cause actual results and
events to differ materially from those expressed or implied by forward-looking
statements. Additionally, numerous other important factors (whether related to,
resulting from or exacerbated by the COVID-19 pandemic or otherwise) could also
cause results and events to differ materially from those expressed or implied by
forward-looking statements, including, without limitation: (1) adverse changes
in mortality, morbidity, lapsation or claims experience, (2) inadequate risk
analysis and underwriting, (3) adverse capital and credit market conditions and
their impact on the Company's liquidity, access to capital and cost of capital,
(4) changes in the Company's financial strength and credit ratings and the
effect of such changes on the Company's future results of operations and
financial condition, (5) the availability and cost of collateral necessary for
regulatory reserves and capital, (6) requirements to post collateral or make
payments due to declines in market value of assets subject to the Company's
collateral arrangements, (7) action by regulators who have authority over the
Company's reinsurance operations in the jurisdictions in which it operates,
(8) the effect of the Company parent's status as an insurance holding company
and regulatory restrictions on its ability to pay principal of and interest on
its debt obligations, (9) general economic conditions or a prolonged economic
downturn affecting the demand for insurance and reinsurance in the Company's
current and planned markets, (10) the impairment of other financial institutions
and its effect on the Company's business, (11) fluctuations in U.S. or foreign
currency exchange rates, interest rates, or securities and real estate markets,
(12) market or economic conditions that adversely affect the value of the
Company's investment securities or result in the impairment of all or a portion
of the value of certain of the Company's investment securities, that in turn
could affect regulatory capital, (13) market or economic conditions that
adversely affect the Company's ability to make timely sales of investment
securities, (14) risks inherent in the Company's risk management and investment
strategy, including changes in investment portfolio yields due to interest rate
or credit quality changes, (15) the fact that the determination of allowances
and impairments taken on the Company's investments is highly subjective,
(16) the stability of and actions by governments and economies in the markets in
which the Company operates, including ongoing uncertainties regarding the amount
of U.S. sovereign debt and the credit ratings thereof, (17) the Company's
dependence on third parties, including those insurance companies and reinsurers
to which the Company cedes some reinsurance, third-party investment managers and
others, (18) financial performance of the Company's clients, (19) the threat of
natural disasters, catastrophes, terrorist attacks, epidemics or pandemics
anywhere in the world where the Company or its clients do business,
(20) competitive factors and competitors' responses to the Company's
initiatives, (21) development and introduction of new products and distribution
opportunities, (22) execution of the Company's entry into new markets,
(23) integration of acquired blocks of business and entities, (24) interruption
or failure of the Company's telecommunication, information technology or other
operational systems, or the Company's failure to maintain adequate security to
protect the confidentiality or privacy of personal or sensitive data and
intellectual property stored on such systems, (25) adverse litigation or
arbitration results, (26) the adequacy of reserves, resources and accurate
information relating to settlements, awards and terminated and discontinued
lines of business, (27) changes in laws, regulations, and accounting standards
applicable to the Company or its business, (28) the effects of the Tax Cuts and
Jobs Act of 2017 may be different than expected and (29) other risks and
uncertainties described in this document and in the Company's other filings with
the Securities and Exchange Commission ("SEC").
Forward-looking statements should be evaluated together with the many risks and
uncertainties that affect the Company's business, including those mentioned in
this document and described in the periodic reports the Company files with the
SEC. These forward-looking statements speak only as of the date on which they
are made. The Company does not undertake any obligation to update these
forward-looking statements, even though the Company's situation may change in
the future. For a discussion of these risks and uncertainties that could cause
actual results to differ materially from those contained in the forward-looking
statements, you are advised to see Item 1A - "Risk Factors" in the 2020 Annual
Report, as may be supplemented by Item 1A - "Risk Factors" in the Company's
subsequent Quarterly Reports on Form 10-Q.
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Overview

The Company is among the leading global providers of life reinsurance and
financial solutions, with $3.4 trillion of life reinsurance in force and assets
of $91.4 billion as of September 30, 2021. Traditional reinsurance includes
individual and group life and health, disability, and critical illness
reinsurance. Financial solutions includes longevity reinsurance, asset-intensive
reinsurance, capital solutions, including financial reinsurance, and stable
value products. The Company derives revenues primarily from renewal premiums
from existing reinsurance treaties, new business premiums from existing or new
reinsurance treaties, fee income from financial solutions business and income
earned on invested assets.
Historically, the Company's primary business has been traditional life
reinsurance, which involves reinsuring life insurance policies that are often in
force for the remaining lifetime of the underlying individuals insured, with
premiums earned typically over a period of 10 to 30 years. To a lesser extent,
the Company also reinsures health business typically reinsured for one to three
years. Each year, however, a portion of the business under existing treaties
terminates due to, among other things, lapses or voluntary surrenders of
underlying policies, deaths of insureds, and the exercise of recapture options
by ceding companies. The Company has expanded its financial solutions business,
including significant asset-intensive and longevity risk transactions, which
allow its clients to take advantage of growth opportunities and manage their
capital, longevity and investment risk.
The Company's long-term profitability largely depends on the volume and amount
of death- and health-related claims incurred and the ability to adequately price
the risks it assumes. While death claims are reasonably predictable over a
period of many years, claims become less predictable over shorter periods and
are subject to significant fluctuation from quarter to quarter and year to year.
For longevity business, the Company's profitability depends on the lifespan of
the underlying contract holders and the investment performance for certain
contracts. Additionally, the Company generates profits on investment spreads
associated with the reinsurance of investment type contracts and generates fees
from financial reinsurance transactions, which are typically shorter duration
than its traditional life reinsurance business. The Company believes its sources
of liquidity are sufficient to cover potential claims payments on both a
short-term and long-term basis.
As is customary in the reinsurance business, clients continually update, refine,
and revise reinsurance information provided to the Company. Such revised
information is used by the Company in preparation of its condensed consolidated
financial statements and the financial effects resulting from the incorporation
of revised data are reflected in the current period.
Segment Presentation
The Company has geographic-based and business-based operational segments.
Geographic-based operations are further segmented into traditional and financial
solutions businesses. The Company allocates capital to its segments based on an
internally developed economic capital model, the purpose of which is to measure
the risk in the business and to provide a consistent basis upon which capital is
deployed. The economic capital model considers the unique and specific nature of
the risks inherent in RGA's businesses.
As a result of the economic capital allocation process, a portion of investment
income is credited to the segments based on the level of allocated capital. In
addition, the segments are charged for excess capital utilized above the
allocated economic capital basis. This charge is included in policy acquisition
costs and other insurance expenses. Segment investment performance varies with
the composition of investments and the relative allocation of capital to the
operating segments.
Segment revenue levels can be significantly influenced by currency fluctuations,
large transactions, mix of business and reporting practices of ceding companies,
and therefore may fluctuate from period to period. Although reasonably
predictable over a period of years, segment claims experience can be volatile
over shorter periods. See "Results of Operations by Segment" below for further
information about the Company's segments.

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Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires the
application of accounting policies that often involve a significant degree of
judgment. Management, on an ongoing basis, reviews estimates and assumptions
used in the preparation of financial statements. If management determines that
modifications in assumptions and estimates are appropriate given current facts
and circumstances, results of operations and financial position as reported in
the condensed consolidated financial statements could change significantly.
Management believes the critical accounting policies relating to the following
areas are most dependent on the application of estimates and assumptions:

Premiums receivable;

Deferred acquisition costs;

Liabilities for future policy benefits and incurred but not reported claims;

Valuation of investments, allowance for credit losses and impairments to
specific investments;

Valuation of embedded derivatives; and

  Income taxes.
A discussion of each of the critical accounting policies may be found in the
Company's 2020 Annual Report under "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies."
Consolidated Results of Operations
Impacts of the COVID-19 Pandemic
The COVID-19 global pandemic continues to cause increases in the Company's
claims costs, primarily relating to its mortality business. However, the Company
cannot reliably predict the future impact of the pandemic on its business,
results of operations and financial condition as the impact will largely depend
on, among other factors, the impact of new variants of the virus, vaccination
levels globally, country-specific circumstances, measures by public and private
institutions, and COVID-19's impact on all other causes of death.
The ultimate amount and timing of claims the Company will experience as a result
of the COVID-19 pandemic will be dependent on many variables and uncertainties.
These variables and uncertainties include those discussed above, in addition to
age, gender, comorbidities, other insured versus general population
characteristics, geography-specific institutional and individual mitigating
actions, medical capacity, and other factors. To date, general population
COVID-19 deaths have been heavily concentrated in individuals aged 70 and older
and with pre-existing comorbidities; however, more recently, many populations
have seen an increase in younger age deaths, particularly in areas where
healthcare facilities were unable to provide adequate care. The Company's
insured population has lower exposure to older ages than the general population
and covers a generally healthier population due to underwriting and
socioeconomic factors of those purchasing insurance. In addition, the Company's
longevity business may act as a modest offset to excess life insurance claims at
older ages.
The Company's COVID-19 projection and financial impact models continue to be
updated and refined based on updated external data and the Company's claim
experience to date and are subject to the many variables and uncertainties noted
above. The U.S. is the key driver of mortality claim costs followed by India,
South Africa, the UK and Canada. For the nine month period ended September 30,
2021, the Company estimates it has incurred approximately $1.1 billion of
COVID-19 related life and health claim costs, including amounts incurred but not
reported, with approximately $593 million of that amount being associated with
the U.S. and Latin America Traditional segment. The Company has maintained the
range of COVID-19 mortality claim cost estimates relative to the level of
general population deaths for the U.S., the UK and Canada. The Company estimates
that every additional 10,000 population deaths in the U.S., UK, or Canada as a
result of COVID-19 would result in the following corresponding excess mortality
claims of approximately
•$10 million to $20 million in the U.S.;
•$4 million to $8 million in the UK; and
•$10 million to $20 million in Canada.
The global financial markets have stabilized since the beginning of the
pandemic; however, they continue to be in a state of uncertainty due to
COVID-19, including supply chain issues and the impact of historically large and
rapid central bank actions and fiscal policies meant to offset the economic
impact of the pandemic. The economic uncertainty caused by these events may also
adversely affect the Company's financial performance. All investments held by
the Company, directly or in a funds withheld at interest reinsurance arrangement
are monitored for conformance with the Company's stated investment policy limits
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as well as any limits prescribed by the applicable jurisdiction's insurance laws
and regulations. The current market environment may result in certain
investments being downgraded which can affect conformance with these limits. The
level of potential impairments will depend on broad economic conditions and the
pace at which global economies recover from the effects of COVID-19 and the
response thereto. See "Investments" for more information.
The safety and well-being of the Company's employees and clients continues to be
a priority. The Company's business continuity plans remain activated and the
actions taken during 2020 to protect both employees and clients, such as working
from home, restricting travel, conducting meetings remotely, and reinforcing the
importance of face coverings, good hygiene and social distancing, also largely
continue. The Company's offices worldwide are at a minimum adhering to local
government mandates and guidelines regarding occupancy levels; however, in
certain situations the Company's guidelines are more restrictive than those of
local governments.
The Company has not experienced any significant disruptions to its daily
operations, despite most of its workforce working remotely. However, COVID-19
heightened operational risks and related impacts, which may include impacts to
the Company's workforce productivity due to travel restrictions, temporary
office closures and increased remote working situations, and potential client
delays in paying premiums and reporting claims. Similar to other reinsurers, the
Company is heavily reliant on timely reporting from its clients and other third
parties. The Company continues to emphasize awareness and training regarding
operational risks, including privacy and cybersecurity risks, as such risks are
heightened during remote working situations. In addition, the Company continues
to monitor its programs, processes and procedures designed to manage these
risks.
RGA's operating subsidiaries continue to be well capitalized, and the Company
continues to monitor its solvency position under multiple capital regimes on a
regular basis while considering both its developing experience and economic
conditions. In addition, the Company utilizes its internal capital model to
assess its ability to meet its long-term obligations under a range of stress
scenarios on a consolidated basis. This internal capital model is also used as
the capital basis for RGA's consolidated Own Risk and Solvency Assessment.
Results from Operations - 2021 compared to 2020
The following table summarizes net income for the periods presented.
                                                       Three months ended September 30,                              Nine months ended September 30,
                                                 2021                2020            2021 vs 2020              2021                2020           2021 vs 2020
Revenues:                                                            (Dollars in millions, except per share data)
Net premiums                                $      3,094          $ 2,825   

$ 269 $ 9,106 $ 8,434 $

672

Investment income, net of related
expenses                                             796              654                    142                 2,367            1,893                 

474

Investment related gains (losses),
net                                                   58               66                     (8)                  472             (138)                  610
Other revenues                                        95               98                     (3)                  354              264                    90
Total revenues                                     4,043            3,643                    400                12,299           10,453                 1,846
Benefits and Expenses:
Claims and other policy benefits                   3,289            2,530                    759                 9,294            7,894                 1,400
Interest credited                                    177              196                    (19)                  541              529                    12
Policy acquisition costs and other
insurance expenses                                   338              374                    (36)                1,010              912                    98
Other operating expenses                             229              211                     18                   683              594                    89
Interest expense                                      41               43                     (2)                  129              126                     3
Collateral finance and securitization
expense                                                3                4                     (1)                    8               14                 

(6)

Total benefits and expenses                        4,077            3,358                    719                11,665           10,069                 

1,596

 Income before income taxes                          (34)             285                   (319)                  634              384                 

250

Provision for income taxes                           (12)              72                    (84)                  173              101                    72
Net income                                  $        (22)         $   213          $        (235)         $        461          $   283          $        178
Earnings per share:
Basic earnings per share                    $      (0.32)         $  3.13          $       (3.45)         $       6.78          $  4.39          $       2.39
Diluted earnings per share                  $      (0.32)         $  3.12   

$ (3.44) $ 6.74 $ 4.36 $

2.38

Three months ended September 30, 2021 compared to three months ended September
30, 2020
The decrease in income for the three months ended September 30, 2021, was
primarily the result of:
•Increased mortality claims in the U.S. and Latin America, EMEA, and Asia
Pacific traditional segments, primarily attributable to the COVID-19 pandemic.
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•The unfavorable mortality claims were partially offset by an increase in income
before taxes generated by the Company's Financial Solutions business in the U.S.
and UK and an increase in investment income and investment related gains
(losses), net primarily due to an increase in variable investment income.
Nine months ended September 30, 2021 compared to nine months ended September 30,
2020
The increase in income for the nine months ended September 30, 2021, was
primarily the result of:
•A one-time adjustment of $162 million, pretax, associated with prior periods
that includes $92 million, pretax, to correct the accounting for equity method
limited partnerships to reflect unrealized gains in investment income, net of
related expenses that were previously included in accumulated other
comprehensive income, and a $70 million, pretax, correction reflected in other
investment related gains (losses), net to adjust the carrying value of certain
limited partnerships from cost less impairments to a fair value approach, using
the net asset value ("NAV") per share or its equivalent.
•$213 million, pretax, of capital gains included in other investment related
gains (losses), net associated with portfolio repositioning.
•Changes in fair value of embedded derivatives, associated with modco/funds
withheld treaties, increased investment related gains of $87 million for the
nine month period ended September 30, 2021, compared to a decrease of $113
million for the nine month period ended September 30, 2020.
•As discussed in the "Impacts of the COVID-19 Pandemic" above, the Company
estimates it has incurred approximately $1.1 billion, pretax, of COVID-19
related life and health claim costs, including amounts incurred but not
reported, with approximately $593 million, pretax, in the U.S. and Latin America
segment.
Foreign currency fluctuations can result in variances in financial statement
line items. Foreign currency (decreased) and increased income before taxes for
the three and nine month periods ended September 30, 2021, by $(5) million and
$13 million, respectively, primarily due to the strengthening of the Great
British Pound, Canadian Dollar and South African Rand compared to the U.S.
Dollar.
Premiums and business growth
The increase in premiums during the three and nine month period ended September
30, 2021, is primarily due to growth in life reinsurance in force. Consolidated
assumed life insurance in force increased to $3,468.6 billion as of September
30, 2021, from $3,369.6 billion as of September 30, 2020, due to new business
production and in force transactions offset by an increase in lapses and
mortality claims in the current period, primarily attributable to the increased
claims as a result of the ongoing COVID-19 pandemic. The Company added new
business production, measured by face amount of insurance in force, of $305.4
billion, and $279.2 billion during the nine months ended September 30, 2021 and
2020, respectively.
Investment income, net of related expenses and investment related gains
(losses), net
The increase in investment income, net of related expenses is primarily
attributable to the aforementioned accounting correction associated with equity
method limited partnerships recorded in the first quarter of 2021, in addition
to an increase in the average invested asset base and yield:
•The average invested assets at amortized cost, excluding spread business,
totaled $33.0 billion for the nine months ended September 30, 2021, compared to
$30.5 billion for the nine months ended September 30, 2020.
•The average yield earned on investments, excluding spread related business, was
4.95% and 3.66% for the three month period ended September 30, 2021 and 2020,
respectively, and 5.08% and 3.93% for the nine months ended September 30, 2021
and 2020, respectively.
•Excluding the aforementioned correction, variable investment income was $150
million and $27 million for the nine months ended September 30, 2021 and 2020,
respectively.
A continued low interest rate environment, in addition to higher cash and cash
equivalents balances held by the Company during the COVID-19 pandemic, is
expected to put downward pressure on this yield in future reporting periods. The
average yield will vary from year to year depending on several variables,
including the prevailing risk-fee interest rate and credit spread environment,
prepayment fees and make-whole premiums, changes in the mix of the underlying
investments and cash and cash equivalents balances. Variable investment income
from joint ventures and limited partnerships, including unrealized gains and
losses on certain limited partnerships, will also vary from year to year and can
be highly variable based on equity-market performance and the timing of
dividends and distributions on certain investments. Investment income is
allocated to the operating segments based upon average assets and related
capital levels deemed appropriate to support segment operations.
The increase in investment related gains (losses), net is primarily attributable
to the following:
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•During the three and nine months ended September 30, 2021, the Company
repositioned its portfolio generating capital gains of $36 million and $213
million, respectively.
•There were no material impairments or changes in allowance for credit losses on
fixed maturities during the three months ended September 30, 2021 or September
30, 2020. During the nine months ended September 30, 2021, the Company
recognized an decrease $3 million of impairments and change in allowance for
credit losses on fixed maturities compared to an increase of $40 million during
the first nine months of 2020.
•Changes in the fair value of embedded derivatives, associated with modco/funds
withheld treaties, increased investment related gains (losses), net by $21
million and $87 million for the three and nine month periods ended September 30,
2021, respectively, compared to an increase (decrease) of $116 million and
$(113) million for the three and nine month periods ended September 30, 2020.
•Unrealized gains of $33 million and $197 million, including the previously
mentioned correction recorded in the first quarter of 2021 of $70 million due to
the change in fair value of certain cost method limited partnerships were
recognized during the three and nine month periods ended September 30, 2021.
The effective tax rate on a consolidated basis was 34.3% and 25.5% for the three
months ended September 30, 2021 and 2020, respectively, and 27.3% and 26.3% for
the nine months ended September 30, 2021 and 2020, respectively. See Note 9 -
"Income Tax" in the Notes to Condensed Consolidated Financial Statements for
additional information on the Company's consolidated effective tax rates.
Impact of certain derivatives
The Company recognizes in consolidated income, any changes in the fair value of
embedded derivatives on modco or funds withheld treaties, equity index annuities
("EIAs") and variable annuities with guaranteed minimum benefit riders. The
Company utilizes freestanding derivatives to minimize the income statement
volatility due to changes in the fair value of embedded derivatives associated
with guaranteed minimum benefit riders. The following table presents the effect
of embedded derivatives and related freestanding derivatives on income before
income taxes for the periods indicated (dollars in millions):
                                             Three Months Ended September 30,                              Nine Months Ended September 30,
                                      2021                2020             2021 vs 2020             2021               2020            2021 vs 2020
Modco/Funds withheld:
Unrealized gains (losses)        $         21          $    116          $         (95)         $       87          $  (113)         $         200
Deferred acquisition
costs/retrocession                         (8)              (65)                    57                 (31)              50                    (81)
Net effect                                 13                51                    (38)                 56              (63)                   119
EIAs:
Unrealized gains (losses)                   4                (5)                     9                  36              (25)                    61
Deferred acquisition
costs/retrocession                         (2)                -                     (2)                (18)              10                    (28)
Net effect                                  2                (5)                     7                  18              (15)                    33
Guaranteed minimum benefit
riders:
Unrealized gains (losses)                 (37)              (29)                    (8)                (36)             (50)                    14
Related freestanding
derivatives, net of deferred
acquisition costs/retrocession              5               (30)                    35                 (28)              63                    (91)
Net effect                                (32)              (59)                    27                 (64)              13                    (77)
Total net effect after
freestanding derivatives         $        (17)         $    (13)         $          (4)         $       10          $   (65)         $          75



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Results of Operations by Segment
U.S. and Latin America Operations
The U.S. and Latin America operations include business generated by the
Company's offices in the U.S., Mexico and Brazil. The offices in Mexico and
Brazil provide services to clients in other Latin American countries. The U.S.
and Latin America operations consist of two major segments: Traditional and
Financial Solutions. The Traditional segment primarily specializes in the
reinsurance of individual mortality risk, health and long-term care and to a
lesser extent, group reinsurance. The Financial Solutions segment consists of
Asset-Intensive and Capital Solutions. Asset-Intensive within the Financial
Solutions segment includes coinsurance of annuities and corporate-owned life
insurance policies and to a lesser extent, fee-based synthetic guaranteed
investment contracts, which include investment-only, stable value contracts.
Capital Solutions within the Financial Solutions segment primarily involves
assisting ceding companies in meeting applicable regulatory requirements by
enhancing the ceding companies' financial strength and regulatory surplus
position through relatively low risk reinsurance and other transactions.
Typically, these transactions do not qualify as reinsurance under GAAP, due to
the low-risk nature of the transactions, therefore only the related net fees are
reflected in other revenues on the condensed consolidated statements of income.
The following table summarizes income before income taxes for the Company's U.S.
and Latin America operations for the periods presented:
                                         Three Months Ended September 30,                                Nine Months Ended September 30,
(dollars in millions)              2021                2020             2021 vs 2020              2021                2020             2021 vs 2020
Revenues:
Net premiums                 $       1,564          $  1,433          $    

131 $ 4,589 $ 4,287 $ 302
Investment income, net of
related expenses

                       536               453                     83                 1,510             1,268                    242
Investment related gains
(losses), net                            7                51                    (44)                   38               (94)                   132
Other revenues                          62                61                      1                   236               174                     62
Total revenues                       2,169             1,998                    171                 6,373             5,635                    738
Benefits and expenses:
Claims and other policy
benefits                             1,718             1,393                    325                 4,957             4,420                    537
Interest credited                      166               182                    (16)                  497               487                     10
Policy acquisition costs and
other insurance expenses               231               290                    (59)                  700               631                     69
Other operating expenses                52                45                      7                   151               127                     24
Total benefits and expenses          2,167             1,910                    257                 6,305             5,665                    640
Income before income taxes   $           2          $     88          $     

(86) $ 68 $ (30) $ 98

The decrease in income before income taxes in the third quarter of 2021 was the
result of an increase in claims and other policy benefits in the U.S.
Traditional segment, partially offset by higher variable investment income and
strong performance from the segment's Financial Solutions business related to
both lower capital losses and income from new transactions. The increase in
income before income taxes for the first nine months of 2021 is attributable
primarily to higher variable investment income from investments in limited
partnerships and real estate joint venture sales, the impact of embedded
derivatives in the segment's Financial Solutions business, and new Financial
Solutions transactions. Partially offsetting the nine month increase were
significantly higher claims in U.S. Mortality Markets. The significant increase
in claims in the U.S. Mortality Markets during the third quarter and the first
nine months compared to the same periods in 2020 was primarily related to an
increase in large and non-large claim frequency within the individual mortality
business. While the cause of death is not yet available for all claims, the
Company believes the excess claim costs are primarily attributable to COVID-19.

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Traditional Reinsurance
                                             Three Months Ended September 30,                                   Nine Months Ended September 30,
(dollars in millions)                  2021                2020           2021 vs 2020                2021                      2020               2021 vs 2020
Revenues:
Net premiums                      $     1,550           $ 1,420          $        130          $         4,547           $        4,247           $        300
Investment income, net of related
expenses                                  245               180                    65                      685                      518                    167
Investment related gains
(losses), net                              (5)               (8)                    3                        2                       (8)                    10
Other revenues                              5                 7                    (2)                      14                       17                     (3)
Total revenues                          1,795             1,599                   196                    5,248                    4,774                    474
Benefits and expenses:
Claims and other policy benefits        1,670             1,343                   327                    4,828                    4,268                    560
Interest credited                          17                19                    (2)                      52                       56                     (4)
Policy acquisition costs and
other insurance expenses                  195               189                     6                      583                      559                     24
Other operating expenses                   39                34                     5                      114                       97                     17
Total benefits and expenses             1,921             1,585            

      336                    5,577                    4,980                

597

Income (loss) before income taxes $ (126) $ 14 $

(140) $ (329) $ (206) $

(123)

Key metrics:
Life insurance in force                                                                           $1,619.9 billion         $1,602.1 billion
Claims and other policy benefits
as a percentage of net premiums
("loss ratios")                         107.7   %          94.6  %                                       106.2   %                100.5   %
Policy acquisition costs and
other insurance expenses as a
percentage of net premiums               12.6   %          13.3  %                                        12.8   %                 13.2   %
Other operating expenses as a
percentage of net premiums                2.5   %           2.4  %                                         2.5   %                  2.3   %


The decrease in income before income taxes in the third quarter and the first
nine months for the U.S. and Latin America Traditional segment was primarily the
result of an increase in claims in the U.S. Mortality Market primarily due to
higher claims which are likely attributable to COVID-19 or COVID-19 related
factors, partially offset by an increase in variable investment income.
Revenues
•The increase in net premiums for the three and nine month periods ended
September 30, 2021, was primarily due to organic growth as well as new sales.
The segment added new life business production, measured by face amount of
insurance in force, of $33.9 billion and $24.6 billion during the third quarter
of 2021 and 2020, respectively, and $98.1 billion and $83.9 billion during the
first nine months of 2021 and 2020, respectively. Also contributing to the
premium growth was the restructure and extension of an existing transaction and
the partial recapture of a retroceded block of individual life business.
•The increase in net investment income for the three and nine month periods
ended September 30, 2021, was primarily due to higher variable investment income
associated with investments in limited partnerships and private equity funds
primarily generated from both realized and unrealized gains in the underlying
investments and higher variable investment income from real estate joint
ventures.
Benefits and expenses
•The increase in the loss ratio for the three and nine months ended September
30, 2021, as compared to the same periods in 2020, was primarily due to
unfavorable large and non-large claims experience in the individual mortality
line of business, likely attributed to the COVID-19 pandemic. As explained
above, while the cause of death is not yet available for all claims, the Company
estimates that approximately $593 million of excess claims for the nine months
ended September 30, 2021, were attributable to COVID-19.
•The increase in other operating expenses for the three and nine months ended
September 30, 2021, was primarily due to an increase in incentive compensation
expense.

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Financial Solutions
For the three months ended
September 30,                                                 2021                                                            2020                                                         2021 vs 2020
                                                                 Capital                                                         Capital                                                          Capital
                                     Asset-Intensive            Solutions            Total           Asset-Intensive            Solutions            Total            Asset-Intensive            Solutions            Total

(dollars in millions)
Revenues:
Net premiums                        $            14          $          -          $   14          $             13          $          -          $    13          $              1          $          -          $     1
Investment income, net of related
expenses                                        290                     1             291                       272                     1              273                        18                     -               18
Investment related gains (losses),
net                                              12                     -              12                        59                     -               59                       (47)                    -              (47)
Other revenues                                   31                    26              57                        26                    28               54                         5                    (2)               3
Total revenues                                  347                    27             374                       370                    29              399                       (23)                   (2)             (25)
Benefits and expenses:
Claims and other policy benefits                 48                     -              48                        50                     -               50                        (2)                    -               (2)
Interest credited                               149                     -             149                       163                     -              163                       (14)                    -              (14)
Policy acquisition costs and other
insurance expenses                               34                     2              36                        99                     2              101                       (65)                    -              (65)
Other operating expenses                         10                     3              13                         8                     3               11                         2                     -                2
Total benefits and expenses                     241                     5             246                       320                     5              325                       (79)                    -              (79)
Income before income taxes          $           106          $         22          $  128          $             50          $         24          $    74          $             56          $         (2)         $    54


For the nine months ended
September 30,                                                2021                                                            2020                                                       2021 vs 2020
                                                                Capital                                                         Capital                                                        Capital
                                    Asset-Intensive            Solutions   

        Total           Asset-Intensive            Solutions            Total          Asset-Intensive            Solutions            Total
(dollars in millions)
Revenues:
Net premiums                       $            42          $          -          $    42          $            40          $          -          $   40          $             2          $          -          $    2
Investment income, net of related
expenses                                       823                     2              825                      746                     4             750                       77                    (2)             75
Investment related gains (losses),
net                                             36                     -               36                      (86)                    -             (86)                     122                     -             122
Other revenues                                 142                    80              222                       78                    79             157                       64                     1              65
Total revenues                               1,043                    82            1,125                      778                    83             861                      265                    (1)            264
Benefits and expenses:
Claims and other policy benefits               129                     -              129                      152                     -             152                      (23)                    -             (23)
Interest credited                              445                     -              445                      431                     -             431                       14                     -              14
Policy acquisition costs and other
insurance expenses                             113                     4              117                       68                     4              72                       45                     -              45
Other operating expenses                        27                    10               37                       22                     8              30                        5                     2               7
Total benefits and expenses                    714                    14              728                      673                    12             685                       41                     2              43
Income before income taxes         $           329          $         68          $   397          $           105          $         71          $  176          $           224          $         (3)         $  221


Asset-Intensive Reinsurance
The increase in income before income taxes for U.S. and Latin America Financial
Solutions' Asset-intensive segment for the three and nine months ended September
30, 2021, was primarily due to contributions from new transactions, favorable
policyholder experience, the change in fair value of the embedded derivatives
and higher investment related gains (losses), net in coinsurance and funds
withheld portfolios.
The invested asset base supporting this segment increased to $24.6 billion as of
September 30, 2021, from $23.6 billion as of September 30, 2020.
•The increase in the asset base was primarily due to growth from new
transactions.
•As of September 30, 2021 and 2020, $4.7 billion and $3.2 billion, respectively,
of the invested assets were funds withheld at interest, of which greater than
90% was associated with two clients.

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Impact of certain derivatives
Income from the asset-intensive business tends to be volatile due to changes in
the fair value of certain derivatives, including embedded derivatives associated
with reinsurance treaties structured on a modco or funds withheld basis, as well
as embedded derivatives associated with the Company's reinsurance of
equity-indexed annuities and variable annuities with guaranteed minimum benefit
riders. Fluctuations occur period to period primarily due to changing investment
conditions including, but not limited to, interest rate movements (including
risk-free rates and credit spreads), implied volatility, the Company's own
credit risk and equity market performance, all of which are factors in the
calculations of fair value. Therefore, management believes it is helpful to
distinguish between the effects of changes in these derivatives, net of related
hedging activity, and the primary factors that drive profitability of the
underlying treaties, namely investment income, fee income (included in other
revenues), and interest credited. These fluctuations are considered unrealized
by management and do not affect current cash flows, crediting rates or spread
performance on the underlying treaties.
The following table summarizes the asset-intensive results and quantifies the
impact of these embedded derivatives for the periods presented. Revenues before
certain derivatives, benefits and expenses before certain derivatives, and
income before income taxes and certain derivatives, should not be viewed as
substitutes for GAAP revenues, GAAP benefits and expenses, and GAAP income
before income taxes.
(dollars in millions)                              Three months ended September 30,       Nine months ended September 30,
                                                        2021               2020               2021               2020
Revenues:
Total revenues                                     $       347          $    370          $    1,043          $    778
Less:
Embedded derivatives - modco/funds withheld
treaties                                                    26               124                  85              (105)
Guaranteed minimum benefit riders and
related free standing derivatives                          (34)              (63)                (99)               50
Revenues before certain derivatives                        355               309               1,057               833
Benefits and expenses:
Total benefits and expenses                                241               320                 714               673
Less:
Embedded derivatives - modco/funds withheld
treaties                                                     8                66                  31               (50)
Guaranteed minimum benefit riders and
related free standing derivatives                           (2)               (4)                (35)               37
Equity-indexed annuities                                    (2)                5                 (18)               15
Benefits and expenses before certain
derivatives                                                237               253                 736               671
Income before income taxes:
Income before income taxes                                 106                50                 329               105
Less:
Embedded derivatives - modco/funds withheld
treaties                                                    18                58                  54               (55)
Guaranteed minimum benefit riders and
related free standing derivatives                          (32)              (59)                (64)               13
Equity-indexed annuities                                     2                (5)                 18               (15)
Income before income taxes and certain
derivatives                                        $       118          $   

56 $ 321 $ 162

Embedded Derivatives - Modco/Funds Withheld Treaties - Represents the change in
the fair value of embedded derivatives on funds withheld at interest associated
with treaties written on a modco or funds withheld basis. The fair value changes
of embedded derivatives are reflected in revenues, while the related impact on
deferred acquisition expenses is reflected in benefits and expenses. The
Company's utilization of a credit valuation adjustment did not have a material
effect on the change in fair value of these embedded derivatives for the nine
months ended September 30, 2021 and 2020.
The change in fair value of the embedded derivatives related to modco/funds
withheld treaties, net of deferred acquisition costs increased (decreased)
income before income taxes by $18 million and $58 million for the third quarter
and $54 million and $(55) million for the nine months ended September 30, 2021
and 2020, respectively. The increase in income for the third quarter was
primarily due to the flattening interest rate curve. The increase in income for
the nine months ended September 30, 2021, was primarily due to tightening credit
spreads.
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Guaranteed Minimum Benefit Riders - Represents the impact related to guaranteed
minimum benefits associated with the Company's reinsurance of variable
annuities. The fair value changes of the guaranteed minimum benefits along with
the changes in fair value of the free standing derivatives (interest rate swaps,
financial futures and equity options), purchased by the Company to substantially
hedge the liability are reflected in revenues, while the related impact on
deferred acquisition expenses is reflected in benefits and expenses. Changes in
fair values of the embedded derivatives on guaranteed minimum benefits are net
of an increase (decrease) in investment related gains (losses), net of $7
million and $(49) million for the third quarter and $(56) million and $79
million for the nine months ended September 30, 2021 and 2020, respectively,
associated with the Company's utilization of a credit valuation adjustment.
The change in fair value of the guaranteed minimum benefits, after allowing for
changes in the associated free standing derivatives, increased (decreased)
income before income taxes by $(32) million and $(59) million for the third
quarter and $(64) million and $13 million for the nine months ended
September 30, 2021 and 2020, respectively. The decrease in income for the three
months ended September 30, 2021, was primarily due to the annual update of best
estimate actuarial assumptions for future mortality improvement. The decrease in
income for the nine months ended September 30, 2021, was primarily due to a
decrease in the credit valuation adjustment which has the impact of increasing
the fair value of the guaranteed minimum benefit liability, net of related
impact on deferred acquisition expenses and the annual update of best estimate
actuarial assumptions for future mortality improvement.
Equity-Indexed Annuities - Represents changes in the liability for
equity-indexed annuities in excess of changes in account value, after
adjustments for related deferred acquisition expenses. The change in fair value
of embedded derivative liabilities associated with equity-indexed annuities
increased (decreased) income before income taxes by $2 million and $(5) million
for the third quarter and $18 million and $(15) million for the nine months
ended September 30, 2021 and 2020, respectively.  The increase in income for the
first nine months of 2021 was primarily due to an increase in risk free interest
rates which has the impact of lowering the fair value of the liability.
The changes in derivatives discussed above are considered unrealized by
management and do not affect current cash flows, crediting rates or spread
performance on the underlying treaties. Fluctuations occur period to period
primarily due to changing investment conditions including, but not limited to,
interest rate movements (including benchmark rates and credit spreads), credit
valuation adjustments, implied volatility and equity market performance, all of
which are factors in the calculations of fair value. Therefore, management
believes it is helpful to distinguish between the effects of changes in these
derivatives and the primary factors that drive profitability of the underlying
treaties, namely investment income, fee income (included in other revenues) and
interest credited.
Discussion and analysis before certain derivatives:
•Income before income taxes and certain derivatives increased by $62 million and
$159 million for the three and nine months ended September 30, 2021, as compared
to the same periods in 2020. The increases were primarily due to contributions
from new transactions, favorable policyholder experience and higher investment
related gains (losses), net in coinsurance and funds withheld portfolios.
•Revenue before certain derivatives increased by $46 million and by $224 million
for the three and nine months ended September 30, 2021, respectively, as
compared to the same periods in 2020. The increases were primarily due to the
revenue associated with recently executed transactions, increases in fair value
of equity options associated with the reinsurance of EIAs and higher investment
related gains (losses), net in coinsurance portfolios. The effect on investment
income related to equity options is substantially offset by a corresponding
change in interest credited.
•Benefits and expenses before certain derivatives increased (decreased) by $(16)
million and $65 million for the three and nine months ended September 30, 2021,
as compared to the same period in 2020. The decrease in the third quarter was
primarily due to the expected run-off from closed block transactions. The
increase in the first nine months was primarily due to higher interest credited
associated with the reinsurance of EIAs due to improved equity market
performance and benefits associated with recently executed transactions,
partially offset by the expected run-off from closed block transactions. The
effect on interest credited related to equity options is substantially offset by
a corresponding increase in investment income.
Capital Solutions
Income before income taxes for the U.S. and Latin America Capital Solutions'
business decreased $2 million, or 8.3%, and $3 million, or 4.2%, for the three
and nine months ended September 30, 2021, as compared to the same periods in
2020. The decreases were primarily due to the termination of certain
transactions, partially offset by growth from new transactions and organic
growth on existing transactions. Fees earned from this business can vary
significantly depending on the size of the transactions and the timing of their
completion and therefore can fluctuate from period to period.
•At September 30, 2021 and 2020, the amount of reinsurance assumed from client
companies, as measured by pre-tax statutory surplus, risk based capital and
other financial structures was $22.0 billion and $20.4 billion, respectively.
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Canada Operations
The Company conducts reinsurance business in Canada primarily through RGA
Canada, which assists clients with capital management activity and mortality and
morbidity risk management. The Canada operations are primarily engaged in
Traditional reinsurance, which consists mainly of traditional individual life
reinsurance, and to a lesser extent creditor, group life and health, critical
illness and disability reinsurance. Creditor insurance covers the outstanding
balance on personal, mortgage or commercial loans in the event of death,
disability or critical illness and is generally shorter in duration than
traditional individual life insurance. The Canada Financial Solutions segment
consists of longevity and capital solutions.
                                         Three Months Ended September 30,                               Nine Months Ended September 30,
(dollars in millions)              2021                2020            2021 vs 2020              2021                2020             2021 vs 2020
Revenues:
Net premiums                 $         311          $    275          $    

36 $ 938 $ 830 $ 108
Investment income, net of
related expenses

                        65                52                    13                   188               152                     36
Investment related gains
(losses), net                            1                 2                    (1)                    3                (4)                     7
Other revenues                           2                 3                    (1)                   11                 7                      4
Total revenues                         379               332                    47                 1,140               985                    155
Benefits and expenses:
Claims and other policy
benefits                               278               242                    36                   860               715                    145
Interest credited                        -                 -                     -                     -                 -                      -
Policy acquisition costs and
other insurance expenses                47                44                     3                   139               132                      7
Other operating expenses                10                10                     -                    31                28                      3
Total benefits and expenses            335               296                    39                 1,030               875                    155

Income before income taxes $ 44 $ 36 $

      8          $        110          $    110          $           -


•The increase in income before income taxes for the three months ended
September 30, 2021, as compared to the same period in 2020, is primarily due to
an increase in investment income. Income before income taxes for the nine months
ended September 30, 2021, as compared to the same period in 2020, is relatively
stable primarily due to an increase in investment income, offset by increased
claims and other policy benefits associated with the COVID-19 pandemic.
•Foreign currency fluctuations can result in variances in the financial
statement line items. Foreign currency fluctuations resulted in a $3 million and
$6 million increase in income before income taxes for the three and nine months
ended September 30, 2021, respectively. Unless otherwise stated, all amounts
discussed below are net of foreign currency fluctuations.
Traditional Reinsurance
                                            Three Months Ended September 30,                                 Nine Months Ended September 30,
(dollars in millions)                  2021              2020           2021 vs 2020               2021                    2020               2021 vs 2020
Revenues:
Net premiums                      $      289           $  254          $         35          $         870           $         768          $         102
Investment income, net of related
expenses                                  65               52                    13                    188                     151                     37
Investment related gains
(losses), net                              1                2                    (1)                     3                      (4)                     7
Other revenues                            (1)               1                    (2)                     2                       1                      1
Total revenues                           354              309                    45                  1,063                     916                    147
Benefits and expenses:
Claims and other policy benefits         255              225                    30                    798                     661                    137
Interest credited                          -                -                     -                      -                       -                      -
Policy acquisition costs and
other insurance expenses                  46               44                     2                    137                     131                      6
Other operating expenses                   9               10                    (1)                    28                      27                      1
Total benefits and expenses              310              279                    31                    963                     819                    

144

Income (loss) before income taxes $       44           $   30          $         14          $         100           $          97          $           3
Key metrics:
Life insurance in force                                                                         $463.1 billion         $419.5 billion
Claims and other policy benefits
as a percentage of net premiums
("loss ratios")                         88.2   %         88.6  %                                      91.7   %                86.1  %
Policy acquisition costs and
other insurance expenses as a
percentage of net premiums              15.9   %         17.3  %                                      15.7   %                17.1  %
Other operating expenses as a
percentage of net premiums               3.1   %          3.9  %                                       3.2   %                 3.5  %


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The increase in income before income taxes for the three months ended September
30, 2021, is primarily due to an increase in investment income. The income
before income taxes for the nine months ended September 30, 2021, as compared to
the same period in 2020, is relatively stable primarily due to an increase in
investment income, partially offset by increased claims and other policy
benefits associated with the COVID-19 pandemic.
Revenues
•The segment added new life business production, measured by face amount of
insurance in force, of $11.5 billion and $8.6 billion for the third quarter of
2021 and 2020, respectively, and $34.2 billion, and $29.9 billion during the
first nine months of 2021 and 2020, respectively.
•The increase in net investment income for the three and nine months ended
September 30, 2021, was primarily due to increased variable investment income
and an increase in the invested asset base due to growth in the underlying
business volume partially offset by a decline in interest rates.
•The increase in investment related gains (losses) for the nine months ended
September 30, 2021, is due to an increase in the fair value of credit default
derivatives during the first nine months of 2021, compared to a decrease in the
fair value of credit default derivatives for the same period in 2020.
Benefits and expenses
•The loss ratio for the three months ended September 30, 2021, is consistent
with the three months ended September 30, 2020. The increase in the loss ratio
for the nine months ended September 30, 2021, as compared to the same period in
2020, was primarily due to unfavorable claims experience in the individual
mortality line of business, attributed primarily to the COVID-19 pandemic. While
the cause of death is not yet available for all claims, the Company estimates
that approximately $50 million of excess claims for the nine months ended
September 30, 2021, were attributable to COVID-19 or COVID-19 related factors.
Financial Solutions Reinsurance
                                            Three Months Ended September 30,                            Nine Months Ended September 30,
(dollars in millions)                  2021              2020           2021 vs 2020              2021               2020           2021 vs 2020
Revenues:
Net premiums                      $        22          $   21          $          1          $        68          $    62          $          6
Investment income, net of related
expenses                                    -               -                     -                    -                1                    (1)
Investment related gains
(losses), net                               -               -                     -                    -                -                     -
Other revenues                              3               2                     1                    9                6                     3
Total revenues                             25              23                     2                   77               69                     8
Benefits and expenses:
Claims and other policy benefits           23              17                     6                   62               54                     8
Interest credited                           -               -                     -                    -                -                     -
Policy acquisition costs and
other insurance expenses                    1               -                     1                    2                1                     1
Other operating expenses                    1               -                     1                    3                1                     2
Total benefits and expenses                25              17                     8                   67               56                    11

Income (loss) before income taxes $ - $ 6 $

(6) $ 10 $ 13 $ (3)

The decrease in income before income taxes for the three months ended September
30, 2021, as compared to the same periods in 2020, is primarily the result of
slightly unfavorable mortality experience on longevity business in 2021 as
compared to favorable experience in 2020. The decrease in income before income
taxes for the nine months ended September 20, 2021, as compared to the same
period in 2020, is also primarily the result of less favorable mortality on
longevity business.

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Europe, Middle East and Africa Operations
The Europe, Middle East and Africa ("EMEA") operations include business
primarily generated by offices in France, Germany, Ireland, Italy, the Middle
East, the Netherlands, Poland, South Africa, Spain and the United Kingdom
("UK"). EMEA consists of two major segments: Traditional and Financial
Solutions. The Traditional segment primarily provides reinsurance through yearly
renewable term and coinsurance agreements on a variety of life, health and
critical illness products. Reinsurance agreements may be facultative or
automatic agreements covering primarily individual risks and, in some markets,
group risks. The Financial Solutions segment consists of reinsurance and other
transactions associated with longevity closed blocks, payout annuities, capital
management solutions and financial reinsurance.
                                       Three Months Ended September 30,                              Nine Months Ended September 30,
(dollars in millions)            2021               2020            2021 vs 2020              2021                2020            2021 vs 2020
Revenues:
Net premiums                 $      528          $    429          $         99          $      1,562          $  1,281          $        281
Investment income, net of
related expenses                     73                64                     9                   215               190                    25
Investment related gains
(losses), net                        23                 4                    19                    41                14                    27
Other revenues                        4                 3                     1                    11                 7                     4
Total revenues                      628               500                   128                 1,829             1,492                   337
Benefits and expenses:
Claims and other policy
benefits                            559               336                   223                 1,559             1,037                   522
Interest credited                    (2)               (1)                   (1)                   (1)               (2)                    1
Policy acquisition costs and
other insurance expenses             37                29                     8                    96                93                     3
Other operating expenses             40                37                     3                   118               104                    14
Total benefits and expenses         634               401                   233                 1,772             1,232                   540

Income before income taxes $ (6) $ 99 $ (105) $ 57 $ 260 $ (203)

•The decreases in income before income taxes for the three and nine months ended
September 30, 2021, as compared to the same periods in 2020, were primarily due
to unfavorable mortality experience mainly from the impact of COVID-19. The
unfavorable mortality experience was partially offset by increases in net
premiums, investment income and investment related gains.
•Foreign currency fluctuations can result in variances in the financial
statement line items. Foreign currency exchange fluctuations resulted in a
decrease in income before income taxes of $9 million and $3 million for the
three and nine months ended September 30, 2021, respectively, as compared to the
same periods in 2020. Unless otherwise stated, all amounts discussed below are
net of foreign currency fluctuations.
Traditional Reinsurance
                                            Three Months Ended September 30,                                 Nine Months Ended September 30,
(dollars in millions)                  2021              2020            2021 vs 2020               2021                   2020              2021 vs 2020
Revenues:
Net premiums                      $      432           $  371          $          61          $      1,303           $       1,113          $        

190

Investment income, net of related
expenses                                  22               18                      4                    66                      55                    11
Investment related gains
(losses), net                              -                -                      -                     -                       -                     -
Other revenues                             -                1                     (1)                    1                       -                     1
Total revenues                           454              390                     64                 1,370                   1,168                   

202

Benefits and expenses:
Claims and other policy benefits         482              331                    151                 1,365                     966                   399
Interest credited                          -                -                      -                     -                       -                     -
Policy acquisition costs and
other insurance expenses                  35               28                      7                    91                      90                     1
Other operating expenses                  28               24                      4                    85                      72                    13
Total benefits and expenses              545              383                    162                 1,541                   1,128                   

413

Income (loss) before income taxes $ (91) $ 7 $

      (98)         $       (171)          $          40          $       (211)
Key metrics:
Life insurance in force                                                                         $852.8 billion         $808.0 billion
Claims and other policy benefits
as a percentage of net premiums
("loss ratios")                        111.6   %         89.2  %                                     104.8   %                86.8  %
Policy acquisition costs and
other insurance expenses as a
percentage of net premiums               8.1   %          7.5  %                                       7.0   %                 8.1  %
Other operating expenses as a
percentage of net premiums               6.5   %          6.5  %                                       6.5   %                 6.5  %


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Income before income taxes decreased for the three and nine months ended
September 30, 2021, as compared to the same periods in 2020. The decreases were
the result of poor mortality experience, primarily due to the impact of
COVID-19. The decreases in both periods were partially offset by increases in
net premiums.
Revenues
•The increase in net premiums for the three and nine months ended September 30,
2021, as compared to the same periods in 2020, was due to an in increase in
business volume on new and existing treaties.
•The segment added new life business production, measured by face amount of
insurance in force, of $32.0 billion and $28.5 billion during the third quarter
of 2021 and 2020, respectively, and $147.4 billion and $126.5 billion during the
nine months ended September 30, 2021 and 2020, respectively.
Benefits and expenses
•The increase in the loss ratio for the third quarter and first nine months of
2021 was due to unfavorable mortality experience primarily attributable to
COVID-19. While the cause of death is not available for all claims, the Company
estimates for the nine months ended September 30, 2021, that approximately $205
million of excess claims, of which approximately $113 million were incurred in
South Africa and $84 million were incurred in the UK. While the cause of death
is not available for all claims, the Company believes the excess claims were
primarily attributable to COVID-19 or COVID-19 related factors.
•The increase in the ratio of policy acquisition costs and other insurance
expense to net premium in the third quarter was due to an increase in premiums
and transactions with higher acquisition costs, and the decrease in the first
nine months of 2021 was due to an overall increase in premiums and transactions
with lower or no acquisition costs.
•The increase in other operating expenses for the three and nine months ended
September 30, 2021, was primarily due to an increase in incentive compensation
expense.
Financial Solutions
                                            Three Months Ended September 30,                            Nine Months Ended September 30,
(dollars in millions)                  2021              2020           2021 vs 2020              2021                2020           2021 vs 2020

Revenues:

Net premiums                      $        96          $   58          $         38          $        259          $   168          $         91
Investment income, net of related
expenses                                   51              46                     5                   149              135                    14
Investment related gains
(losses), net                              23               4                    19                    41               14                    27
Other revenues                              4               2                     2                    10                7                     3
Total revenues                            174             110                    64                   459              324                   135
Benefits and expenses:
Claims and other policy benefits           77               5                    72                   194               71                   123
Interest credited                          (2)             (1)                   (1)                   (1)              (2)                    1
Policy acquisition costs and
other insurance expenses                    2               1                     1                     5                3                     2
Other operating expenses                   12              13                    (1)                   33               32                     1
Total benefits and expenses                89              18                    71                   231              104                   127

Income (loss) before income taxes $ 85 $ 92 $

(7) $ 228 $ 220 $ 8

The decrease in income before income taxes for the third quarter of 2021,
compared to the same period in 2020, is primarily due to increases in claims and
other policy benefits, partially offset by increases in investment income, net
of related expenses and investment related gains (losses), net. The increase in
income before income taxes for the first nine months of 2021 was primarily due
to new business activity and investment related gains on the investments
supporting the segment's payout annuity business, partially offset by a
normalization of performance.
Revenues
•The increase in net premiums for the three and nine months ended September 30,
2021, as compared to the same periods in 2020, was primarily due to increased
volumes of closed longevity block business.
•The increase in net investment income for the three and nine months ended
September 30, 2021, as compared to the same periods in 2020, was primarily due
to higher investment income on fixed-income securities and life-time mortgages.
•The increase in investment related gains (losses), net for the three and nine
month periods was primarily due to fluctuations in the fair market value of CPI
swap derivatives due to changes in future inflation expectations and higher
investment related gains on fixed-income securities, respectively.
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Benefits and expenses
•The increase in claims and other policy benefits for the three months ended
September 30, 2021, as compared to the same period in 2020, was the result of
increased volumes of closed longevity block business.
Asia Pacific Operations
The Asia Pacific operations include business generated by its offices
principally in Australia, China, Hong Kong, India, Japan, Malaysia, New Zealand,
Singapore, South Korea and Taiwan. The Traditional segment's principal types of
reinsurance include individual and group life and health, critical illness,
disability and superannuation. Reinsurance agreements may be facultative or
automatic agreements covering primarily individual risks, and in some markets,
group risks. Superannuation is the Australian government mandated compulsory
retirement savings program. Superannuation funds accumulate retirement funds for
employees, and, in addition, typically offer life and disability insurance
coverage. The Financial Solutions segment includes financial reinsurance,
asset-intensive and certain disability and life blocks.
                                       Three Months Ended September 30,                              Nine Months Ended September 30,
(dollars in millions)            2021               2020            2021 vs 2020              2021                2020            2021 vs 2020
Revenues:
Net premiums                 $      691          $    688          $          3          $      2,017          $  2,036          $        (19)
Investment income, net of
related expenses                     70                44                    26                   196               136                    60
Investment related gains
(losses), net                       (15)                -                   (15)                   11               (18)                   29
Other revenues                       12                14                    (2)                   42                38                     4
Total revenues                      758               746                    12                 2,266             2,192                    74
Benefits and expenses:
Claims and other policy
benefits                            734               558                   176                 1,918             1,721                   197
Interest credited                    12                13                    (1)                   42                37                     5
Policy acquisition costs and
other insurance expenses             50                38                    12                   156               140                    16
Other operating expenses             52                49                     3                   152               134                    18
Total benefits and expenses         848               658                   190                 2,268             2,032                   236

Income before income taxes $ (90) $ 88 $ (178) $ (2) $ 160 $ (162)

•The decrease in income before income taxes for the three and nine months ended
September 30, 2021, was primarily due to unfavorable claims experience in Asia
compared to the prior period, partially offset by continued growth of Financial
Solutions Reinsurance in Asia and increases in investment income, net and
investment related gains (losses).
•Foreign currency fluctuations can result in variances in the financial
statement line items. Foreign currency fluctuations were immaterial for the
three and nine months ended September 30, 2021, as compared to the same periods
in 2020. Unless otherwise stated, all amounts discussed below are net of foreign
currency fluctuations.
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Traditional Reinsurance
                                            Three Months Ended September 30,                                Nine Months Ended September 30,
(dollars in millions)                  2021              2020           2021 vs 2020               2021                   2020              2021 vs 2020
Revenues:
Net premiums                      $      626           $  653          $        (27)         $      1,851           $       1,896          $        

(45)

Investment income, net of related
expenses                                  33               22                    11                   100                      76                    24
Investment related gains
(losses), net                              -                -                     -                    (1)                      -                    (1)
Other revenues                             4                5                    (1)                   13                      11                     2
Total revenues                           663              680                   (17)                1,963                   1,983                   (20)
Benefits and expenses:
Claims and other policy benefits         682              525                   157                 1,778                   1,594                   184
Interest credited                          -                -                     -                     -                       -                     -
Policy acquisition costs and
other insurance expenses                  31               33                    (2)                  115                     116                    (1)
Other operating expenses                  46               44                     2                   137                     124                    13
Total benefits and expenses              759              602                   157                 2,030                   1,834                   196

Income (loss) before income taxes $ (96) $ 78 $

    (174)         $        (67)          $         149          $       (216)
Key metrics:
Life insurance in force                                                                        $526.0 billion         $534.4 billion
Claims and other policy benefits
as a percentage of net premiums
("loss ratios")                        108.9   %         80.4  %                                     96.1   %                84.1  %
Policy acquisition costs and
other insurance expenses as a
percentage of net premiums               5.0   %          5.1  %                                      6.2   %                 6.1  %
Other operating expenses as a
percentage of net premiums               7.3   %          6.7  %                                      7.4   %                 6.5  %


The decrease in income before income taxes is primarily the result of net
unfavorable claims experience in Asia, primarily in India. The decrease for the
first nine months is also the result of year-to-date decreases in net premiums
in Australia.
Revenues
•The decrease in net premiums for the three and nine months ended September 30,
2021, as compared to the same periods in 2020, was primarily due to premium
reductions in Australia group business as a result of the non-renewal of two
large group treaties effective June 30, 2020.
•The segment added new life business production, measured by face amount of
insurance in force, of $7.1 billion and $6.7 billion during the third quarter of
2021 and 2020, respectively, and $25.6 billion and $39.0 billion during the nine
months ended September 30, 2021 and 2020, respectively, due to new business
production and in force transactions offset by lapses, recaptures and
non-renewal of two large group treaties in Australia.
Benefits and expenses
•The increases in the loss ratio for the three and nine months ended September
30, 2021, as compared to the same periods in 2020, were primarily due to
unfavorable claims experience in Asia, primarily in India. While the cause of
death is not yet available for all claims, the Company estimates that
approximately $235 million of excess claims, of which approximately $218 million
were incurred in India, for the nine months ended September 30, 2021, were
attributable to COVID-19 or COVID-19 related factors.

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Financial Solutions
                                            Three Months Ended September 30,                            Nine Months Ended September 30,
(dollars in millions)                  2021              2020           2021 vs 2020              2021                2020           2021 vs 2020
Revenues:
Net premiums                      $        65          $   35          $         30          $        166          $   140          $         26
Investment income, net of related
expenses                                   37              22                    15                    96               60                    36
Investment related gains
(losses), net                             (15)              -                   (15)                   12              (18)                   30
Other revenues                              8               9                    (1)                   29               27                     2
Total revenues                             95              66                    29                   303              209                    94
Benefits and expenses:
Claims and other policy benefits           52              33                    19                   140              127                    13
Interest credited                          12              13                    (1)                   42               37                     5
Policy acquisition costs and
other insurance expenses                   19               5                    14                    41               24                    17
Other operating expenses                    6               5                     1                    15               10                     5
Total benefits and expenses                89              56                    33                   238              198                    40

Income (loss) before income taxes $ 6 $ 10 $

(4) $ 65 $ 11 $ 54

The decrease in income before income taxes for the third quarter was primarily
due to the decline in the fair value of derivatives, partially offset by the
contributions from recently executed asset-intensive transactions in Asia. The
increase in income before income taxes for the first nine months of 2021 was due
to the increase in the fair value of derivatives and contributions from recently
executed asset-intensive transactions in Asia.
The amount of reinsurance assumed from client companies, as measured by pre-tax
statutory surplus, risk based capital and other financial reinsurance structures
was $1.4 billion and $2.9 billion for the nine months ended September 30, 2021
and 2020, respectively. Fees earned from this business can vary significantly
depending on the size, complexity and timing of the transactions and, therefore,
can fluctuate from period to period.
Revenues
•The increase in net premiums for the three and nine months ended September 30,
2021, is primarily due to contributions from single premium asset-intensive
transactions.
•The increase in investment income for the three and nine months ended September
30, 2021, is primarily due to the contributions from recently executed
asset-intensive transactions in Asia.
•The decrease in investment related gains (losses), net for the third quarter is
primarily due to the decrease in fair value of derivatives as a result of higher
expected interest rates. The increase in investment related gains (losses), net
for the nine month period ended September 30, 2021, is primarily due to an
increase in the fair value of derivatives as a result of lower expected interest
rates and tightening credit spreads.
Benefits and expenses
•The increase in claims and other policy benefits, and policy acquisition costs
and other insurance expenses for the three and nine months ended September 30,
2021, is the result of increased production from single premium asset-intensive
transactions.
Corporate and Other
Corporate and Other revenues primarily include investment income from
unallocated invested assets, investment related gains and losses and service
fees. Corporate and Other expenses consist of the offset to capital charges
allocated to the operating segments within the policy acquisition costs and
other insurance income line item, unallocated overhead and executive costs,
interest expense related to debt, and the investment income and expense
associated with the Company's collateral finance and securitization transactions
and service business expenses. Additionally, Corporate and Other includes
results from certain wholly-owned subsidiaries, such as RGAX, and joint ventures
that, among other activities, develop and market technology, and provide
consulting and outsourcing solutions for the insurance and reinsurance
industries. The Company has increased its investment and expenditures in this
area in an effort to both support its clients and accelerate the development of
new solutions and services to increase consumer engagement within the life
insurance industry and hence generate new future revenue streams.
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(dollars in millions)                         Three months ended September 30,                             Nine months ended September 30,
                                         2021               2020           2021 vs 2020             2021               2020            2021 vs 2020
Revenues:
Net premiums                        $         -          $     -          $          -          $        -          $     -          $           -
Investment income, net of related
expenses                                     52               41                    11                 258              147                    111
Investment related gains (losses),
net                                          42                9                    33                 379              (36)                   415
Other revenues                               15               17                    (2)                 54               38                     16
Total revenues                              109               67                    42                 691              149                    542
Benefits and expenses:
Claims and other policy benefits              -                1                    (1)                  -                1                     (1)
Interest credited                             1                2                    (1)                  3                7                     (4)
Policy acquisition costs and other
insurance income                            (27)             (27)                    -                 (81)             (84)                     3
Other operating expenses                     75               70                     5                 231              201                     30
Interest expense                             41               43                    (2)                129              126                      3
Collateral finance and
securitization expense                        3                4                    (1)                  8               14                     (6)
Total benefits and expenses                  93               93                     -                 290              265                     25

Income (loss) before income taxes $ 16 $ (26) $

42 $ 401 $ (116) $ 517

The increase in income before income taxes for the three and nine month periods
ended September 30, 2021, is primarily due to an increase in total revenues.
Year-to-date increases in revenues were partially offset by an increase in other
operating expenses.
•The increase in net investment income for the three and nine months ended
September 30, 2021, is primarily due to higher variable investment income
associated with investments in limited partnerships generated from unrealized
gains in the underlying investments. The increase in the nine months ended
September 30, 2021, includes a reclassification recorded in the first quarter of
approximately $92 million of pre-tax unrealized gains on certain limited
partnerships, for which the Company uses the equity method of accounting, from
AOCI to net investment income that should have been recognized directly in net
investment income in the same prior periods they were reported as earnings by
the investees.
•The increase in investment related gains (losses), net for the three and nine
months ended September 30, 2021, includes $24 million and $155 million,
respectively, of changes in the carrying value of investments in limited
partnerships considered to be investment companies. Recognized in the first
quarter of 2021 were changes of $70 million relate to an adjustment to the
carrying value from cost less impairments to a fair value approach, using the
NAV per share or its equivalent, which should have been recognized in prior
periods. The remaining increase for the three and nine months ended September
30, 2021, is attributable to gains on sales of fixed maturity securities, a
decrease in the allowance for credit losses on mortgage loans as a result of
assumption updates due to the improving view of the impact of the COVID-19
pandemic, and changes in the fair value of derivatives and equity securities.
•The increase in other operating expenses for the nine months ended September
30, 2021, was primarily due to an increase in incentive compensation expense.
Liquidity and Capital Resources
Overview
The Company believes that cash flows from the source of funds available to it
will provide sufficient cash flows for the next twelve months to satisfy the
current liquidity requirements of the Company under various scenarios that
include the potential risk of early recapture of reinsurance treaties, market
events and higher than expected claims associated with the pandemic. Given the
uncertainty associated with the COVID-19 pandemic and the related volatility in
the financial markets, the Company continues to maintain a higher cash and cash
equivalent balance than its historical balances. The Company performs periodic
liquidity stress testing to ensure its asset portfolio includes sufficient high
quality liquid assets that could be utilized to bolster its liquidity position
under stress scenarios. These assets could be utilized as collateral for secured
borrowing transactions with various third parties or by selling the securities
in the open market if needed. The Company's liquidity requirements have been and
will continue to be funded through net cash flows from operations. However, in
the event of significant unanticipated cash requirements, the Company has
multiple liquidity alternatives available based on market conditions and the
amount and timing of the liquidity need. These alternatives include borrowings
under committed credit facilities, secured borrowings, the ability to issue
long-term debt, preferred securities or common equity and, the sale of invested
assets subject to market conditions.
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Current Market Environment
The Company's average investment yield, excluding spread business, for the nine
months ended September 30, 2021, was 5.08%, 115 basis points higher compared to
the same period in 2020. The increase in average yield is primarily attributable
to the aforementioned accounting correction associated with equity method
limited partnerships and an increase in the average invested asset base and
overall yield, primarily attributable to an increase in variable investment
income in the current year. However, the current interest rate environment
continues to put downward pressure on the Company's investment yield. The
Company's insurance liabilities, in particular its annuity products, are
sensitive to changing market factors. Gross unrealized gains on fixed maturity
securities available-for-sale decreased from $7.4 billion at December 31, 2020,
to $5.3 billion at September 30, 2021. Similarly, gross unrealized losses
increased from $197 million at December 31, 2020, to $326 million at
September 30, 2021.
The Company continues to be in a position to hold any investment security
showing an unrealized loss until recovery, provided it remains comfortable with
the credit of the issuer. As indicated above, gross unrealized gains on fixed
maturity securities of $5.3 billion remain well in excess of gross unrealized
losses of $326 million as of September 30, 2021. The Company does not rely on
short-term funding or commercial paper and to date has experienced no liquidity
pressure, nor does it anticipate such pressure in the foreseeable future.
The Company projects its reserves to be sufficient, and it would not expect to
write down deferred acquisition costs or be required to take any actions to
augment capital, even if interest rates remain at current levels for the next
five years, assuming all other factors remain constant. While the Company has
felt the pressures of sustained low interest rates and volatile equity markets
and may continue to do so, its business and results of operations are not overly
sensitive to these risks. Mortality and morbidity risks continue to be the most
significant risk for the Company. Although management believes the Company's
current capital base is adequate to support its business at current operating
levels, it continues to monitor new business opportunities and any associated
new capital needs that could arise from the changing financial landscape.
The Holding Company
RGA is an insurance holding company whose primary uses of liquidity include, but
are not limited to, the immediate capital needs of its operating companies,
dividends paid to its shareholders, repurchase of common stock and interest
payments on its indebtedness. The primary sources of RGA's liquidity include
proceeds from its capital-raising efforts, interest income on undeployed
corporate investments, interest income received on surplus notes with RGA
Reinsurance, RCM and Rockwood Re and dividends from operating subsidiaries. The
following tables provide comparative information for RGA (dollars in millions):
                                                  Three months ended September 30,                  Nine months ended September 30,
                                                      2021                     2020                    2021                    2020
Interest and dividend income                 $               303          $        21          $             367          $       429
Interest expense                                              47                   35                        150                  135
Capital contributions to subsidiaries                          5                   13                         12                   46
Issuance of unaffiliated debt                                  -                    -                          -                  598
Dividends to shareholders                                     50                   47                        145                  134
Issuance of common stock, net of
expenses                                                       -                    -                          -                  481
Purchase of treasury stock                                    46                    -                         48                  153


                               September 30, 2021       December 31, 2020
Cash and invested assets      $               615      $            1,308


See Item 15, Schedule II - "Condensed Financial Information of the Registrant"
in the 2020 Annual Report for additional financial information related to RGA.
The undistributed earnings of substantially all of the Company's foreign
subsidiaries have been reinvested indefinitely in those non-U.S. operations, as
described in Note 9 - "Income Tax" in the Notes to Consolidated Financial
Statements in the 2020 Annual Report. As U.S. Tax Reform generally eliminates
U.S. federal income taxes on dividends from foreign subsidiaries, the Company
does not expect to incur material income taxes if these funds are repatriated.
RGA endeavors to maintain a capital structure that provides financial and
operational flexibility to its subsidiaries, credit ratings that support its
competitive position in the financial services marketplace, and shareholder
returns. As part of the Company's capital deployment strategy, it has in recent
years repurchased shares of RGA common stock and paid dividends to RGA
shareholders, as authorized by the board of directors. RGA's current share
repurchase program, which was approved by the board of directors in January
2019, authorizes the repurchase of up to $400 million of common stock. On August
3, 2021, the Company announced the lifting of the existing suspension on share
repurchases. During the nine months ended September 30, 2021, RGA repurchased
405,644 shares of common stock under this program for $46 million. During the
nine months ended September 30, 2020, RGA repurchased 1,074,413 shares of common
stock under this program for $153 million. The pace of
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repurchase activity depends on various factors such as the level of available
cash, an evaluation of the costs and benefits associated with alternative uses
of excess capital, such as acquisitions and in force reinsurance transactions,
and RGA's stock price.
Details underlying dividend and share repurchase program activity were as
follows (in millions, except share data):
                                                   Nine months ended September 30,
                                                         2021                      2020
 Dividends to shareholders                 $            145                     $    134
 Purchase of treasury stock (1)                          46                 

153

 Total amount paid to shareholders         $            191                 

$ 287

 Number of treasury shares purchased (1)                406                        1,074
 Average price per share                   $         113.40                     $ 142.05


(1)Excludes shares utilized to execute and settle certain stock incentive
awards.
On June 5, 2020, the Company completed a public offering of 6,172,840 shares of
common stock, $0.01 par value per share, at a public offering price of $81.00
per share.  The Company received net proceeds of approximately $481 million. The
Company granted the underwriters an option to purchase from the Company, within
30 days after the underwriting Agreement dated June 2, 2020, up to an additional
925,926 shares of common stock at the offering price of $81.00 per share. The
underwriters' option was not exercised and expired on July 2, 2020. The Company
utilized the net proceeds of the offering for general corporate purposes.
In October 2021, RGA's board of directors declared a quarterly dividend of $0.73
per share. All future payments of dividends are at the discretion of RGA's board
of directors and will depend on the Company's earnings, capital requirements,
insurance regulatory conditions, operating conditions, and other such factors as
the board of directors may deem relevant. The amount of dividends that RGA can
pay will depend in part on the operations of its reinsurance subsidiaries. See
Note 3 - "Equity" in the Notes to Condensed Consolidated Financial Statements
for information on the Company's share repurchase program.
Debt
Certain of the Company's debt agreements contain financial covenant restrictions
related to, among others, liens, the issuance and disposition of stock of
restricted subsidiaries, minimum requirements of consolidated net worth, maximum
ratios of debt to capitalization and change of control provisions. The Company
is required to maintain a minimum consolidated net worth, as defined in the debt
agreements, of $5.3 billion, calculated as of the last day of each fiscal
quarter. Also, consolidated indebtedness, calculated as of the last day of each
fiscal quarter, cannot exceed 35% of the sum of the Company's consolidated
indebtedness plus adjusted consolidated stockholders' equity. A material ongoing
covenant default could require immediate payment of the amount due, including
principal, under the various agreements. Additionally, the Company's debt
agreements contain cross-acceleration covenants, which would make outstanding
borrowings immediately payable in the event of a material uncured covenant
default under any of the agreements, including, but not limited to, non-payment
of indebtedness when due for an amount in excess of the amounts set forth in
those agreements, bankruptcy proceedings, or any other event that results in the
acceleration of the maturity of indebtedness.
As of September 30, 2021 and December 31, 2020, the Company had $3.2 billion and
$3.6 billion, respectively, in outstanding borrowings under its debt agreements
and was in compliance with all covenants under those agreements. As of
September 30, 2021 and December 31, 2020, the average net interest rate on
long-term debt outstanding was 4.48% and 4.54%, respectively. The ability of the
Company to make debt principal and interest payments depends on the earnings and
surplus of subsidiaries, investment earnings on undeployed capital proceeds,
available liquidity at the holding company, and the Company's ability to raise
additional funds.
On June 9, 2020, RGA issued 3.15% Senior Notes due June 15, 2030, with a face
amount of $600 million. This security has been registered with the Securities
and Exchange Commission. The net proceeds were approximately $593 million and
were used in part to repay the Company's $400 million 5.00% senior notes due in
the second quarter of 2021, and the remainder was used for general corporate
purposes. Capitalized issue costs were approximately $5 million.
The Company enters into derivative agreements with counterparties that reference
either the Company's debt rating or its financial strength rating. If either
rating is downgraded in the future, it could trigger certain terms in the
Company's derivative agreements, which could negatively affect overall
liquidity. For the majority of the Company's derivative agreements, there is a
termination event should the long-term senior debt ratings drop below either
BBB+ (S&P) or Baa1 (Moody's) or the financial strength ratings drop below either
A- (S&P) or A3 (Moody's).
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The Company may borrow up to $850 million in cash and obtain letters of credit
in multiple currencies on its revolving credit facility that matures in August
2023. As of September 30, 2021, the Company had no cash borrowings outstanding
and $21 million in issued, but undrawn, letters of credit under this facility.
Based on the historic cash flows and the current financial results of the
Company, management believes RGA's cash flows will be sufficient to enable RGA
to meet its obligations for at least the next twelve months.
Credit and Committed Facilities
At September 30, 2021, the Company maintained an $850 million syndicated
revolving credit facility and certain committed letter of credit facilities
aggregating to $1.1 billion. See Note 13 - "Debt" in the Notes to Consolidated
Financial Statements in the 2020 Annual Report for further information about
these facilities.
The Company has obtained bank letters of credit in favor of various affiliated
and unaffiliated insurance companies from which the Company assumes business.
These letters of credit represent guarantees of performance under the
reinsurance agreements and allow ceding companies to take statutory reserve
credits. Certain of these letters of credit contain financial covenant
restrictions similar to those described in the "Debt" discussion above. At
September 30, 2021, there were approximately $22 million of outstanding bank
letters of credit in favor of third parties. Additionally, in accordance with
applicable regulations, the Company utilizes letters of credit to secure
statutory reserve credits when it retrocedes business to its affiliated
subsidiaries. The Company cedes business to its affiliates to help reduce the
amount of regulatory capital required in certain jurisdictions, such as the U.S.
and the UK. The Company believes the capital required to support the business in
the affiliates reflects more realistic expectations than the original
jurisdiction of the business, where capital requirements are often considered to
be quite conservative. As of September 30, 2021, $1.5 billion in letters of
credit from various banks were outstanding, but undrawn, backing reinsurance
between the various subsidiaries of the Company.
Cash Flows
The Company's principal cash inflows from its reinsurance operations include
premiums and deposit funds received from ceding companies. The primary liquidity
concerns with respect to these cash flows are early recapture of the reinsurance
contract by the ceding company and lapses of annuity products reinsured by the
Company. The Company's principal cash inflows from its invested assets result
from investment income and the maturity and sales of invested assets. The
primary liquidity concerns with respect to these cash inflows relates to the
risk of default by debtors and interest rate volatility. The Company manages
these risks very closely. See "Investments" and "Interest Rate Risk" below.
Additional sources of liquidity to meet unexpected cash outflows in excess of
operating cash inflows and current cash and equivalents on hand also includes
drawing funds under a revolving credit facility, under which the Company had
availability of $829 million as of September 30, 2021. The Company also has $574
million of funds available through collateralized borrowings from the FHLB as of
September 30, 2021. As of September 30, 2021, the Company could have borrowed
these additional amounts without violating any of its existing debt covenants.
The Company's principal cash outflows relate to the payment of claims
liabilities, interest credited, operating expenses, income taxes, dividends to
shareholders, purchases of treasury stock and principal and interest under debt
and other financing obligations. The Company seeks to limit its exposure to loss
on any single insured and to recover a portion of benefits paid by ceding
reinsurance to other insurance enterprises or reinsurers under excess coverage
and coinsurance contracts (See Note 2 - "Significant Accounting Policies and
Pronouncements" in the Notes to Consolidated Financial Statements in the 2020
Annual Report). The Company performs annual financial reviews of its
retrocessionaires to evaluate financial stability and performance. The Company
has never experienced a material default in connection with retrocession
arrangements, nor has it experienced any difficulty in collecting claims
recoverable from retrocessionaires; however, no assurance can be given as to the
future performance of such retrocessionaires nor to the recoverability of future
claims. The Company's management believes its cash and cash equivalents along
with its current sources of liquidity are adequate to meet its cash requirements
for the next twelve months, despite the uncertainty associated with the
pandemic.
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Summary of Primary Sources and Uses of Liquidity and Capital
The Company's primary sources and uses of liquidity and capital are summarized
as follows:

For the nine months ended September

                                                                                             30,
                                                                                  2021                  2020
                                                                                    (Dollars in millions)
Sources:
         Net cash provided by operating activities                          $       3,821          $     2,779

         Proceeds from issuance of common stock, net                                    -                  481
         Proceeds from long-term debt issuance                                          -                  598
         Exercise of stock options, net                                                 -                    1
         Change in cash collateral for derivative positions and other
         arrangements                                                                  29                   28
         Change in deposit asset on reinsurance                                           14                 -
         Net deposits from investment-type policies and contracts                       -                     617
         Effect of exchange rate changes on cash                                        -                    8
         Total sources                                                              3,864                4,512

Uses:
         Net cash used in investing activities                                      3,492                2,214
         Dividends to stockholders                                                    145                  134
         Repayment of collateral finance and securitization notes                      74                  188
         Debt issuance costs                                                            -                    5
         Principal payments of long-term debt                                         402                    2

         Purchases of treasury stock                                                   48                  162

         Net withdrawals from investment-type policies and contracts                   51                    -
         Effect of exchange rate changes on cash                                       33                    -
         Total uses                                                                 4,245                2,705
Net change in cash and cash equivalents                                     

$ (381) $ 1,807

Cash Flows from Operations - The principal cash inflows from the Company's
reinsurance activities come from premiums, investment and fee income, annuity
considerations and deposit funds. The principal cash outflows relate to the
liabilities associated with various life and health insurance, annuity and
disability products, operating expenses, income tax payments and interest on
outstanding debt obligations. The primary liquidity concern with respect to
these cash flows is the risk of shortfalls in premiums and investment income,
particularly in periods with abnormally high claims levels.
Cash Flows from Investments - The principal cash inflows from the Company's
investment activities come from repayments of principal on invested assets,
proceeds from maturities of invested assets, sales of invested assets and
settlements of freestanding derivatives. The principal cash outflows relate to
purchases of investments, issuances of policy loans and settlements of
freestanding derivatives. The Company typically has a net cash outflow from
investing activities because cash inflows from insurance operations are
reinvested in accordance with its asset/liability management discipline to fund
insurance liabilities. The Company closely monitors and manages these risks
through its credit risk management process. The primary liquidity concerns with
respect to these cash flows are the risk of default by debtors and market
disruption, which could make it difficult for the Company to sell investments.
Financing Cash Flows - The principal cash inflows from the Company's financing
activities come from issuances of RGA debt and equity securities, and deposit
funds associated with universal life and other investment type policies and
contracts. The principal cash outflows come from repayments of debt, payments of
dividends to stockholders, purchases of treasury stock, and withdrawals
associated with universal life and other investment type policies and contracts.
A primary liquidity concern with respect to these cash flows is the risk of
early contractholder and policyholder withdrawal.

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Contractual Obligations
There were no other material changes in the Company's contractual obligations
from those reported in the 2020 Annual Report, except for the following:
•The Company's contractual obligations associated with interest sensitive
liabilities increased from $37.1 billion at December 31, 2020, to $41.5 billion
as of September 30, 2021, primarily due to a large asset-intensive transaction
completed in the second quarter. The majority of the payments due under these
commitments are expected to occur beyond five years.
•The Company's contractual obligations associated with limited partnerships and
other investment related commitments increased from $1.1 billion at December 31,
2020, to $1.9 billion as of September 30, 2021, primarily due to an increase in
new investment opportunities in the current period. The majority of the payments
due under these commitments are expected to occur within the next twelve months.
Asset / Liability Management
The Company actively manages its cash and invested assets using an approach that
is intended to balance quality, diversification, asset/liability matching,
liquidity and investment return. The goals of the investment process are to
optimize after-tax, risk-adjusted investment income and after-tax, risk-adjusted
total return while managing the assets and liabilities on a cash flow and
duration basis.
The Company has established target asset portfolios for its operating segments,
which represent the investment strategies intended to profitably fund its
liabilities within acceptable risk parameters. These strategies include
objectives and limits for effective duration, yield curve sensitivity and
convexity, liquidity, asset sector concentration and credit quality.
The Company's asset-intensive products are primarily supported by investments in
fixed maturity securities reflected on the Company's balance sheet and under
funds withheld arrangements with the ceding company. Investment guidelines are
established to structure the investment portfolio based upon the type, duration
and behavior of products in the liability portfolio so as to achieve targeted
levels of profitability. The Company manages the asset-intensive business to
provide a targeted spread between the interest rate earned on investments and
the interest rate credited to the underlying interest-sensitive contract
liabilities. The Company periodically reviews models projecting different
interest rate scenarios and their effect on profitability. Certain of these
asset-intensive agreements, primarily in the U.S. and Latin America Financial
Solutions operating segment, are generally funded by fixed maturity securities
that are withheld by the ceding company.
The Company's liquidity position (cash and cash equivalents and short-term
investments) was $3.1 billion and $3.6 billion at September 30, 2021 and
December 31, 2020, respectively. Given the uncertainty associated with the
COVID-19 pandemic and the related volatility in the financial markets, the
Company has increased its liquidity position. Liquidity needs are determined
from valuation analyses conducted by operational units and are driven by product
portfolios. Periodic evaluations of demand liabilities and short-term liquid
assets are designed to adjust specific portfolios, as well as their durations
and maturities, in response to anticipated liquidity needs.
See "Securities Borrowing, Lending and Other" in Note 4 - "Investments" in the
Notes to Condensed Consolidated Financial Statements for information related to
the Company's securities borrowing, lending and repurchase/reverse repurchase
programs. In addition to its security agreements with third parties, certain
RGA's subsidiaries have entered into intercompany securities lending agreements
to more efficiently source securities for lending to third parties and to
provide for more efficient regulatory capital management.
The Company is a member of the FHLB and holds $77 million of FHLB common stock,
which is included in other invested assets on the Company's condensed
consolidated balance sheets.
The Company has entered into funding agreements with the FHLB under guaranteed
investment contracts whereby the Company has issued the funding agreements in
exchange for cash and for which the FHLB has been granted a blanket lien on the
Company's commercial and residential mortgage-backed securities and commercial
mortgage loans used to collateralize the Company's obligations under the funding
agreements. The Company maintains control over these pledged assets, and may
use, commingle, encumber or dispose of any portion of the collateral as long as
there is no event of default and the remaining qualified collateral is
sufficient to satisfy the collateral maintenance level. The funding agreements
and the related security agreements represented by this blanket lien provide
that upon any event of default by the Company, the FHLB's recovery is limited to
the amount of the Company's liability under the outstanding funding agreements.
The amount of the Company's liability for the funding agreements with the FHLB
under guaranteed investment contracts was $1.6 billion and $1.9 billion at
September 30, 2021 and December 31, 2020, which is included in
interest-sensitive contract liabilities on the Company's condensed consolidated
balance sheets. The advances on these agreements are collateralized primarily by
commercial and residential mortgage-backed securities, commercial mortgage
loans, and U.S. Treasury and government agency securities. The
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amount of collateral exceeds the liability and is dependent on the type of
assets collateralizing the guaranteed investment contracts.
Investments
Management of Investments
The Company's investment and derivative strategies involve matching the
characteristics of its reinsurance products and other obligations and to seek to
closely approximate the interest rate sensitivity of the assets with estimated
interest rate sensitivity of the reinsurance liabilities. The Company achieves
its income objectives through strategic and tactical asset allocations, security
and derivative strategies within an asset/liability management and disciplined
risk management framework. Derivative strategies are employed within the
Company's risk management framework to help manage duration, currency, and other
risks in assets and/or liabilities and to replicate the credit characteristics
of certain assets.
The Company's portfolio management groups work with the Enterprise Risk
Management function to develop the investment policies for the assets of the
Company's domestic and international investment portfolios. All investments held
by the Company, directly or in a funds withheld at interest reinsurance
arrangement, are monitored for conformance with the Company's stated investment
policy limits as well as any limits prescribed by the applicable jurisdiction's
insurance laws and regulations. See Note 4 - "Investments" in the Notes to
Condensed Consolidated Financial Statements for additional information regarding
the Company's investments.
Effects of COVID-19
Credit markets continued to recover during the first nine months of 2021
following the disruption in the global financial markets caused by the COVID-19
pandemic. The Company has exposure to some of the asset classes and industries
most affected by the COVID-19 pandemic such as commercial mortgage loans,
emerging market debt, energy, and airlines; however, the Company's primary
exposure in these asset classes is of high quality assets. The Company continues
to monitor and evaluate the impact of the COVID-19 pandemic on its investment
portfolio and is working closely with its borrowers to evaluate any short-term
cash flow issues.
Portfolio Composition
The Company had total cash and invested assets of $80.6 billion and $75.8
billion as of September 30, 2021 and December 31, 2020, respectively, as
illustrated below (dollars in millions):
                                                 September 30,                                    December 31,
                                                     2021                  % of Total                 2020                  % of Total
Fixed maturity securities,
available-for-sale                              $     59,289                       73.6  %       $     56,735                       74.8  %
Equity securities                                        160                        0.2                   132                        0.2
Mortgage loans on real estate                          6,366                        7.9                 5,787                        7.6
Policy loans                                           1,234                        1.5                 1,258                        1.7
Funds withheld at interest                             7,034                        8.7                 5,432                        7.2
Short-term investments                                    82                        0.1                   227                        0.3
Other invested assets                                  3,404                        4.2                 2,829                        3.7
Cash and cash equivalents                              3,027                        3.8                 3,408                        4.5
Total cash and invested assets                  $     80,596                      100.0  %       $     75,808                      100.0  %



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Investment Yield
The following table presents consolidated average invested assets, at amortized
cost, net investment income, investment yield, variable investment income
("VII"), and investment yield excluding VII, which can vary significantly from
period to period (dollars in millions). The table excludes spread related
business. Spread related business is primarily associated with contracts on
which the Company earns an interest rate spread between assets and liabilities.
To varying degrees, fluctuations in the yield on other spread related business
is generally subject to corresponding adjustments to the interest credited on
the liabilities.
                                                Three months ended September 30,                                 Nine months ended September 30,
                                                                                Increase/                                                          Increase/
                                          2021                2020              (Decrease)              2021                     2020              (Decrease)
Average invested assets at amortized
cost                                 $    33,361           $ 32,148          $      1,213          $    33,021                $ 30,468          $      2,553
Net investment income                $       405           $    290          $        115          $     1,251                $    894          $        357
Annualized investment yield (ratio
of net investment income to average
invested assets at amortized cost)          4.95   %           3.66  %               129 bps              5.08   %                3.93  %               115 bps
VII (included in net investment
income)                              $       102           $      8          $         94          $       342                $     27          $        315
Annualized investment yield
excluding VII (ratio of net
investment income, excluding VII, to
average invested assets, excluding
assets with only VII, at amortized
cost)                                       3.85   %           3.69  %                16 bps              3.83   %                3.95  %              (12) bps


Investment yield increased for the three and nine months ended September 30,
2021, in comparison to the same periods in the prior year, primarily due to
increased variable income from limited partnerships and real estate joint
ventures, which are included in other invested assets on the condensed
consolidated balance sheets. Investment yield excluding variable investment
income increased for the three months ended September 30, 2021, in comparison to
the same period in the prior year, primarily due to lower than normal income
from derivatives in the prior period. Investment yield excluding variable
investment income decreased for the nine months ended September 30, 2021, in
comparison to the same period in the prior year, primarily due to the continued
low interest rate environment.
Fixed Maturity Securities Available-for-Sale
See "Fixed Maturity Securities Available-for-Sale" in Note 4 - "Investments" in
the Notes to Condensed Consolidated Financial Statements for tables that provide
the amortized cost, allowance for credit losses, unrealized gains and losses and
estimated fair value of these securities by type as of September 30, 2021 and
December 31, 2020.
The Company holds various types of fixed maturity securities available-for-sale
and classifies them as corporate securities ("Corporate"), Canadian and Canadian
provincial government securities ("Canadian government"), residential
mortgage-backed securities ("RMBS"), asset-backed securities ("ABS"), commercial
mortgage-backed securities ("CMBS"), U.S. government and agencies ("U.S.
government"), state and political subdivisions, and other foreign government,
supranational and foreign government-sponsored enterprises ("Other foreign
government"). RMBS, ABS, and CMBS are collectively "structured securities." As
of September 30, 2021 and December 31, 2020, approximately 93.4% and 94.0%,
respectively, of the Company's consolidated investment portfolio of fixed
maturity securities were investment grade.
Important factors in the selection of investments include diversification,
quality, yield, call protection and total rate of return potential. The relative
importance of these factors is determined by market conditions and the
underlying reinsurance liability and existing portfolio characteristics. The
Company owns floating rate securities that represent approximately 5.4% and 5.6%
of the total fixed maturity securities as of September 30, 2021 and December 31,
2020, respectively. These investments have a higher degree of income variability
than the other fixed income holdings in the portfolio due to fluctuations in
interest payments. The Company holds floating rate investments to match specific
floating rate liabilities primarily reflected in the condensed consolidated
balance sheets as collateral finance notes, as well as to enhance asset
management strategies.
The largest asset class in which fixed maturity securities were invested was
corporate securities, which represented approximately 62.9% and 63.9% of total
fixed maturity securities as of September 30, 2021 and December 31, 2020,
respectively. See "Corporate Fixed Maturity Securities" in Note 4 -
"Investments" in the Notes to Condensed Consolidated Financial Statements for
tables showing the major sector types, which comprise the corporate fixed
maturity holdings as of September 30, 2021 and December 31, 2020.
As of September 30, 2021, the Company's investments in Canadian government
securities represented 8.0% of the fair value of total fixed maturity securities
compared to 9.1% of the fair value of total fixed maturities as of December 31,
2020. These assets are primarily high quality, long duration provincial strip
bonds, the valuation of which is closely linked to the interest rate curve.
These assets are longer in duration and held primarily for asset/liability
management to meet Canadian regulatory requirements.
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The Company references rating agency designations in some of its investments
disclosures. These designations are based on the ratings from nationally
recognized statistical rating organizations, primarily Moody's, S&P and Fitch.
Structured securities held by the Company's insurance subsidiaries that maintain
the NAIC statutory basis of accounting utilize the NAIC rating methodology. The
NAIC assigns designations to publicly traded as well as privately placed
securities. The designations assigned by the NAIC range from class 1 to class 6,
with designations in classes 1 and 2 generally considered investment grade (BBB
or higher rating agency designation). NAIC designations in classes 3 through 6
are generally considered below investment grade (BB or lower rating agency
designation).
The quality of the Company's available-for-sale fixed maturity securities
portfolio, as measured at fair value and by the percentage of fixed maturity
securities invested in various ratings categories, relative to the entire
available-for-sale fixed maturity securities portfolio, as of September 30, 2021
and December 31, 2020 was as follows (dollars in millions):
                                                                                        September 30, 2021                                                      December 31, 2020
         NAIC                       Rating Agency                                          Estimated                                       Amortized           Estimated
     Designation                     Designation                 Amortized

Cost            Fair Value             % of Total                 Cost              Fair Value             % of Total
          1                  AAA/AA/A                          $         32,444          $    35,554                        60.0  %       $  29,770          $    34,589                        60.9  %
          2                  BBB                                         18,025               19,814                        33.4             16,440               18,751                        33.1
          3                  BB                                           2,868                2,952                         5.0              2,480                2,588                         4.6
          4                  B                                              832                  822                         1.4                713                  697                         1.2
          5                  CCC and lower                                  161                  137                         0.2                131                  102                         0.2
          6                  In or near default                              17                   10                           -                 14                    8                           -
                             Total                             $         54,347          $    59,289                       100.0  %       $  49,548          $    56,735                       100.0  %

The Company's fixed maturity portfolio includes structured securities. The
following table shows the types of structured securities the Company held as of
September 30, 2021 and December 31, 2020 (dollars in millions):

                                                                    September 30, 2021                                                      December 31, 2020
                                                                         Estimated                                                               Estimated
                                                Amortized Cost           Fair Value            % of Total             Amortized  Cost            Fair Value            % of Total
RMBS:
Agency                                        $           594          $       631                     9.2  %       $             686          $       744                    11.0  %
Non-agency                                                571                  578                     8.4                      1,049                1,073                    15.8
Total RMBS                                              1,165                1,209                    17.6                      1,735                1,817                    26.8
ABS:
Collateralized loan obligations
("CLOs")                                                1,841                1,838                    26.8                      1,707                1,689                    24.9
ABS, excluding CLOs                                     1,922                1,941                    28.3                      1,392                1,403                    20.7
Total ABS                                               3,763                3,779                    55.1                      3,099                3,092                    45.6
CMBS                                                    1,795                1,877                    27.3                      1,790                1,868                    27.6
Total                                         $         6,723          $     6,865                   100.0  %       $           6,624          $     6,777                   100.0  %


The Company's RMBS portfolio includes agency-issued pass-through securities and
collateralized mortgage obligations. Agency-issued pass-through securities are
guaranteed or otherwise supported by the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, or the Government National Mortgage
Association. The principal risks inherent in holding RMBS are prepayment and
extension risks, which will affect the timing of when cash will be received and
are dependent on the level of mortgage interest rates. Prepayment risk is the
unexpected increase in principal payments from the expected, primarily as a
result of owner refinancing. Extension risk relates to the unexpected slowdown
in principal payments from the expected. In addition, non-agency RMBS face
credit risk should the borrower be unable to pay the contractual interest or
principal on their obligation. The Company monitors its mortgage-backed
securities to mitigate exposure to the cash flow uncertainties associated with
these risks.
The Company's ABS portfolio primarily consists of CLOs, aircraft, single-family
rentals, container leasing and whole business. The principal risks in holding
ABS are structural, credit, capital market and interest rate risks. Structural
risks include the securities' cash flow priority in the capital structure and
the inherent prepayment sensitivity of the underlying collateral. Credit risks
include the adequacy and ability to realize proceeds from the collateral. Credit
risks are mitigated by credit enhancements that include excess spread,
over-collateralization and subordination. Capital market risks include general
level of interest rates and the liquidity for these securities in the
marketplace.
The Company's CMBS portfolio primarily consists of large pool securitizations
that are diverse by property type, borrower and geographic dispersion. The
principal risks in holding CMBS are structural and credit risks. Structural
risks include the securities' cash flow priority in the capital structure and
the inherent prepayment sensitivity of the underlying collateral. Credit risks
include the adequacy and ability to realize proceeds from the collateral. The
Company focuses on investment grade rated
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tranches that provide additional credit support beyond the equity protection in
the underlying loans. These assets are viewed as an attractive alternative to
other fixed income asset classes.
As of September 30, 2021 and December 31, 2020, the Company had $326 million and
$197 million, respectively, of gross unrealized losses related to its fixed
maturity securities. The Company monitors its fixed maturity securities to
determine impairments in value and evaluates factors such as financial condition
of the issuer, payment performance, compliance with covenants, general market
and industry sector conditions, current intent and ability to hold securities,
and various other subjective factors. Based on management's judgment, securities
determined to have expected credit losses will record an allowance for credit
losses in the amount that the fair value is less than the amortized cost.
Mortgage Loans on Real Estate
The Company's mortgage loan portfolio consists of U.S., Canada and UK based
investments primarily in commercial offices, light industrial properties and
retail locations. The mortgage loan portfolio is diversified by geographic
region and property type as discussed further under "Mortgage Loans on Real
Estate" in Note 4 - "Investments" in the Notes to Condensed Consolidated
Financial Statements. Most of the mortgage loans in the Company's portfolio
range in size up to $30 million, with the average mortgage loan investment as of
September 30, 2021, totaling approximately $9 million. For the nine months ended
September 30, 2021, the Company decreased its allowance for credit losses on its
commercial mortgage loan portfolio by approximately $25 million to reflect the
updated outlook from the COVID-19 pandemic.
The Company continues to monitor and evaluate the impact of the COVID-19
pandemic on its investment portfolio and is working closely with its borrowers
to evaluate any short-term cash flow issues. For the nine months ended
September 30, 2021, the Company modified the payment terms of one commercial
mortgage loan, with a carrying value of approximately $10 million in response to
COVID-19. For the year ended December 31, 2020, the Company modified the
payments terms of approximately 52 commercial mortgage loans, with a carrying
value of approximately $660 million in response to COVID-19. These loans met the
criteria established in the Coronavirus Aid, Relief, and Economic Security Act
(the "CARES Act") and were not considered a troubled debt restructuring. In
accordance with the CARES Act criteria, these loans were not more than 30 days
past due at December 31, 2019, and the modifications included deferral or
delayed payments of principal or interest on the loan. As of September 30, 2021
and December 31, 2020, the Company's recorded investment in mortgage loans,
gross of unamortized deferred loan origination fees and expenses and allowance
for credit losses, were distributed geographically as follows (dollars in
millions):
                             September 30, 2021                     

December 31, 2020

                          Recorded                               Recorded
                         Investment          % of Total         Investment         % of Total
U.S. Region:
West                 $           2,359           36.8  %    $          2,253           38.5  %
South                            2,167           33.8                  2,040           34.8
Midwest                          1,161           18.1                  1,027           17.5
Northeast                          411            6.4                    277            4.7
Subtotal - U.S.                  6,098           95.1                  5,597           95.5
Canada                             193            3.0                    188            3.2
United Kingdom                     123            1.9                     76            1.3
Other                                2              -                      -              -
Total                $           6,416          100.0  %    $          5,861          100.0  %


See "Allowance for Credit Losses and Impairments" in Note 2 - "Significant
Accounting Policies and Pronouncements" of the Company's 2020 Annual Report for
information regarding the Company's policy for allowance for credit losses and
impairments on mortgage loans.
See "Mortgage Loans on Real Estate" in Note 4 - "Investments" in the Notes to
Condensed Consolidated Financial Statements for information regarding allowance
for credit losses and impairments.

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Impairments and Allowance for Credit Losses
The Company's determination of whether a decline in value necessitates the
recording of an allowance for credit losses includes an analysis of whether the
issuer is current on its contractual payments, evaluating whether it is probable
that the Company will be able to collect all amounts due according to the
contractual terms of the security and analyzing the overall ability of the
Company to recover the amortized cost of the investment. See "Allowance for
Credit Losses and Impairments" in Note 2 - "Significant Accounting Policies and
Pronouncements" of the Company's 2020 Annual Report for additional information.
The table below summarizes investment related (gains) losses, net, for
impairments and changes in allowance for credit losses on fixed maturity
securities, other impairment losses and changes in provision and changes in the
mortgage loan allowance for credit losses for the three and nine months ended
September 30, 2021 and 2020 (dollars in millions).
                                          Three months ended September 30,               Nine months ended September 30,
                                              2021                  2020                    2021                    2020

Impairments and change in allowance
for credit losses on fixed maturity
securities                             $             1          $      (13)         $               (2)         $       21
Other impairment losses and changes in
provision                                            2                  11                           -                  16
Change in mortgage loan allowance for
credit losses                                       (6)                  8                         (25)                 38
Total                                  $            (3)         $        6          $              (27)         $       75


The decrease in mortgage loan allowance for credit losses for the nine months
ended September 30, 2021, was primarily due to the updated outlook from the
COVID-19 pandemic. The impairments and change in allowance for credit losses on
fixed maturity securities for the nine months ended September 30, 2020, were
primarily related to high-yield securities as a result of the uncertainty in the
global markets due to the COVID-19 pandemic. In addition, the increase in
mortgage loan allowance for credit losses for the nine months ended September
30, 2020, was primarily due to the estimated impact from the COVID-19 pandemic.
See "Unrealized Losses for Fixed Maturity Securities Available-for-Sale" in Note
4 - "Investments" in the Notes to Condensed Consolidated Financial Statements
for tables that present the estimated fair value and gross unrealized losses for
securities that have estimated fair values below amortized cost, by class and
grade, as well as the length of time the related estimated fair value has
remained below amortized cost as of September 30, 2021 and December 31, 2020.
As of September 30, 2021 and December 31, 2020, the Company classified
approximately 7.6% and 5.9%, respectively, of its fixed maturity securities in
the Level 3 category (refer to Note 6 - "Fair Value of Assets and Liabilities"
in the Notes to Condensed Consolidated Financial Statements for additional
information). These securities primarily consist of private placement corporate
securities, bank loans, and Canadian provincial strip bonds with inactive
trading markets.
See "Securities Borrowing, Lending and Repurchase Agreements" in Note 4 -
"Investments" in the Notes to Condensed Consolidated Financial Statements for
information related to the Company's securities borrowing, lending, and
repurchase/reverse repurchase programs.
Policy Loans
The majority of policy loans are associated with one client. These policy loans
present no credit risk because the amount of the loan cannot exceed the
obligation due to the ceding company upon the death of the insured or surrender
of the underlying policy. The provisions of the treaties in force and the
underlying policies determine the policy loan interest rates. The Company earns
a spread between the interest rate earned on policy loans and the interest rate
credited to corresponding liabilities.
Funds Withheld at Interest
For reinsurance agreements written on a modified coinsurance basis and certain
agreements written on a coinsurance basis, assets equal to the net statutory
reserves are withheld and legally owned and managed by the ceding company, and
are reflected as funds withheld at interest on the Company's condensed
consolidated balance sheets. In the event of a ceding company's insolvency, the
Company would need to assert a claim on the assets supporting its reserve
liabilities. However, the risk of loss to the Company is mitigated by its
ability to offset amounts it owes the ceding company for claims or allowances
against amounts owed by the ceding company. Interest accrues to the total funds
withheld at interest assets at rates defined by the treaty terms. The Company is
subject to the investment performance on the withheld assets, although it does
not directly control them. These assets are primarily fixed maturity investment
securities and pose risks similar to the fixed maturity securities the Company
owns. To mitigate this risk, the Company helps set the investment guidelines
followed by the ceding company and monitors compliance. Ceding companies with
funds withheld at interest had an average financial strength rating of "A" as of
September 30, 2021 and December 31, 2020. Certain ceding companies maintain
segregated portfolios for the benefit of the Company.

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Other Invested Assets
Other invested assets include limited partnership interests, joint ventures
(other than operating joint ventures), lifetime mortgages, derivative contracts,
fair value option ("FVO") contractholder-directed unit-linked investments and
FHLB common stock. See "Other Invested Assets" in Note 4 - "Investments" in the
Notes to Condensed Consolidated Financial Statements for a table that presents
the carrying value of the Company's other invested assets by type as of
September 30, 2021 and December 31, 2020.
The Company utilizes derivative financial instruments to protect the Company
against possible changes in the fair value of its investment portfolio as a
result of interest rate changes, to hedge against risk of changes in the
purchase price of securities, to hedge liabilities associated with the
reinsurance of variable annuities with guaranteed living benefits and to manage
the portfolio's effective yield, maturity and duration. In addition, the Company
utilizes derivative financial instruments to reduce the risk associated with
fluctuations in foreign currency exchange rates. The Company uses
exchange-traded, centrally cleared, and customized over-the-counter derivative
financial instruments.
See Note 5 - "Derivative Instruments" in the Notes to Condensed Consolidated
Financial Statements for a table that presents the notional amounts and fair
value of investment related derivative instruments held as of September 30, 2021
and December 31, 2020.
The Company may be exposed to credit-related losses in the event of
non-performance by counterparties to derivative financial instruments.
Generally, the credit exposure of the Company's derivative contracts is limited
to the fair value and accrued interest of non-collateralized derivative
contracts in an asset position at the reporting date. As of September 30, 2021,
the Company had credit exposure of $18 million.
The Company manages its credit risk related to over-the-counter derivatives by
entering into transactions with creditworthy counterparties, maintaining
collateral arrangements and through the use of master agreements that provide
for a single net payment to be made by one counterparty to another at each due
date and upon termination. As exchange-traded futures are affected through
regulated exchanges, and positions are marked to market on a daily basis, the
Company has minimal exposure to credit-related losses in the event of
nonperformance by counterparties. See Note 5 - "Derivative Instruments" in the
Notes to Condensed Consolidated Financial Statements for more information
regarding the Company's derivative instruments.
The Company holds $1,155 million and $935 million, of lifetime mortgages, net of
allowance for credit losses, as of September 30, 2021 and December 31, 2020,
respectively, in beneficial interests in lifetime mortgages in the UK.
Investment income includes $15 million and $12 million in interest income earned
on lifetime mortgages for the three months ended September 30, 2021 and 2020,
respectively, and $41 million and $32 million in interest income earned on
lifetime mortgages for the nine months ended September 30, 2021 and 2020,
respectively. Lifetime mortgages represent loans provided to individuals 55
years of age and older secured by the borrower's residence. Lifetime mortgages
are comparable to a home equity loan by allowing the borrower to utilize the
equity in their home as collateral. The amount of the loan is dependent on the
appraised value of the home at the time of origination, the borrower's age and
interest rate. Unlike a home equity loan, no payment of principal or interest is
required until the death of the borrower or sale of the home. Lifetime mortgages
may also be either fully funded at origination, or the borrower can request
periodic funding similar to a line of credit. Lifetime mortgages are subject to
risks, including market, credit, interest rate, liquidity, operational,
reputational and legal risks.
New Accounting Standards
See Note 14 - "New Accounting Standards" in the Notes to Condensed Consolidated
Financial Statements.