REINSURANCE GROUP OF AMERICA INC - Quarter Report: 2022 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

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

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-11848

REINSURANCE GROUP OF AMERICA, INCORPORATED

(Exact name of Registrant as specified in its charter)


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

16600 Swingley Ridge Road

Chesterfield, Missouri 63017

(Address of principal executive offices)

(636) 736-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No o

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

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

Smaller reporting company ☐ Emerging growth company ☐

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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

RGA

New York Stock Exchange

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

RZA

New York Stock Exchange

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

RZB

New York Stock Exchange

As of July 31, 2022, 67,007,268 shares of the registrant’s common stock were outstanding.

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

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Item		Page

	PART I – FINANCIAL INFORMATION

1	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) June 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Income (Unaudited) three and six months June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) three and six months ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) three and six months ended June 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) six months ended June 30, 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements (Unaudited):	8
	1. Business and Basis of Presentation	8
	2. Earnings Per Share	8
	3. Equity	9
	4. Investments	11
	5. Derivative Instruments	19
	6. Fair Value of Assets and Liabilities	25
	7. Segment Information	32
	8. Commitments, Contingencies and Guarantees	33
	9. Income Tax	34
	10. Employee Benefit Plans	35
	11. Reinsurance Ceded Receivables and Other	35
	12. Policy Claims and Benefits	36
	13. New Accounting Standards	36
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
3	Quantitative and Qualitative Disclosures About Market Risk	66
4	Controls and Procedures	66

	PART II – OTHER INFORMATION

1	Legal Proceedings	67
1A	Risk Factors	67
2	Unregistered Sales of Equity Securities and Use of Proceeds	67
6	Exhibits	67
	Index to Exhibits	68
	Signatures	69

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PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2022		December 31, 2021
	(Dollars in millions, except share data)
Assets
Fixed maturity securities available-for-sale, at fair value (amortized cost of $57,608 and $55,873; allowance for credit losses of $55 and $31)	$	53,294	$	60,749
Equity securities, at fair value	127		151
Mortgage loans (net of allowance for credit losses of $38 and $35)	6,544		6,283
Policy loans	1,218		1,234
Funds withheld at interest	6,393		6,954
Short-term investments	272		87
Other invested assets	3,110		3,070
Total investments	70,958		78,528
Cash and cash equivalents	2,556		2,948
Accrued investment income	572		533
Premiums receivable and other reinsurance balances	2,884		2,888
Reinsurance ceded receivables and other	2,558		2,580
Deferred policy acquisition costs	3,856		3,690
Other assets	1,225		1,008
Total assets	$	84,609	$	92,175
Liabilities and Equity
Future policy benefits	$	34,833	$	35,782
Interest-sensitive contract liabilities	29,023		26,377
Other policy claims and benefits	6,464		6,993
Other reinsurance balances	582		613
Deferred income taxes	1,060		2,886
Other liabilities	2,899		2,663

Long-term debt	3,667		3,667
Collateral finance and securitization notes	152		180
Total liabilities	78,680		79,161
Commitments and contingent liabilities (See Note 8)
Equity:
Preferred stock – par value $0.01 per share, 10,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock – par value $0.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at June 30, 2022 and December 31, 2021	1		1
Additional paid-in capital	2,478		2,461
Retained earnings	8,592		8,563
Treasury stock, at cost – 18,303,330 and 18,139,868 shares	(1,673)		(1,653)
Accumulated other comprehensive income (loss)	(3,559)		3,642
Total Reinsurance Group of America, Inc. stockholders’ equity	5,839		13,014
Noncontrolling interest	90		—
Total equity	5,929		13,014
Total liabilities and stockholders’ equity	$	84,609	$	92,175

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

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Revenues:	(Dollars in millions, except per share data)
Net premiums	$	3,230	$	3,098	$	6,385	$	6,012
Net investment income	754		759		1,564		1,571




Investment related gains (losses), net	(254)		112		(380)		414
Other revenues	157		168		248		259
Total revenues	3,887		4,137		7,817		8,256
Benefits and Expenses:
Claims and other policy benefits	2,815		2,813		6,040		6,005
Interest credited	138		218		279		364
Policy acquisition costs and other insurance expenses	393		339		748		672
Other operating expenses	243		240		469		454
Interest expense	42		43		84		88
Collateral finance and securitization expense	2		2		3		5
Total benefits and expenses	3,633		3,655		7,623		7,588
Income before income taxes	254		482		194		668
Provision for income taxes	55		138		58		185
Net income	$	199	$	344	$	136	$	483
Net income attributable to noncontrolling interest	1		—		1		—
Net income available to RGA, Inc. shareholders	$	198	$	344	$	135	$	483
Earnings per share:
Basic earnings per share	$	2.95	$	5.06	$	2.01	$	7.11
Diluted earnings per share	$	2.92	$	5.02	$	2.00	$	7.06

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

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Comprehensive income (loss)	(Dollars in millions)
Net income	$	199	$	344	$	136	$	483
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(43)		19		(30)		49
Net unrealized investment gains (losses)	(3,460)		1,020		(7,170)		(1,367)

Defined benefit pension and postretirement plan adjustments	(1)		—		(1)		—
Total other comprehensive income (loss), net of tax	(3,504)		1,039		(7,201)		(1,318)
Total comprehensive income (loss)	(3,305)		1,383		(7,065)		(835)
Comprehensive income attributable to noncontrolling interest	1		—		1		—
Total comprehensive income (loss) available to RGA, Inc. shareholders	$	(3,306)	$	1,383	$	(7,066)	$	(835)

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

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in millions except per share amounts)

(Unaudited)


	Three months ended June 30, 2022 and 2021
	Common Stock		Additional Paid In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total RGA, Inc. Stockholders’ Equity		Noncontrolling Interest		Total Equity
Balance, March 31, 2022	$	1	$	2,465	$	8,446	$	(1,675)	$	(55)	$	9,182	$	90	$	9,272

Distributions to noncontrolling interest													(1)		(1)
Net income					198						198		1		199
Total other comprehensive income (loss)									(3,504)		(3,504)				(3,504)
Dividends to stockholders, $0.73 per share					(49)						(49)				(49)

Purchase of treasury stock											—				—
Reissuance of treasury stock			13		(3)		2				12				12
Balance, June 30, 2022	$	1	$	2,478	$	8,592	$	(1,673)	$	(3,559)	$	5,839	$	90	$	5,929


Balance, March 31, 2021	$	1	$	2,411	$	8,235	$	(1,559)	$	3,002	$	12,090	$	—	$	12,090


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

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


	Six months ended June 30, 2022 and 2021
	Common Stock		Additional Paid In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total RGA, Inc. Stockholders’ Equity		Noncontrolling Interest		Total Equity
Balance, December 31, 2021	$	1	$	2,461	$	8,563	$	(1,653)	$	3,642	$	13,014	$	—	$	13,014

Issuance of preferred interests by subsidiary													90		90
Distributions to noncontrolling interest													(1)		(1)
Net income					135						135		1		136
Total other comprehensive income (loss)									(7,201)		(7,201)				(7,201)
Dividends to stockholders, $1.46 per share					(98)						(98)				(98)
Issuance of common stock, net of expenses											—				—
Purchase of treasury stock							(27)				(27)				(27)
Reissuance of treasury stock			17		(8)		7				16				16
Balance, June 30, 2022	$	1	$	2,478	$	8,592	$	(1,673)	$	(3,559)	$	5,839	$	90	$	5,929


Balance, December 31, 2020	$	1	$	2,406	$	8,148	$	(1,562)	$	5,359	$	14,352	$	—	$	14,352



Net income					483						483		—		483
Total other comprehensive income (loss)									(1,318)		(1,318)				(1,318)
Dividends to stockholders, $1.40 per share					(95)						(95)				(95)
Issuance of common stock, net of expenses											—				—
Purchase of treasury stock							(2)				(2)				(2)
Reissuance of treasury stock			24		(5)		5				24				24
Balance, June 30, 2021	$	1	$	2,430	$	8,531	$	(1,559)	$	4,041	$	13,444	$	—	$	13,444

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

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended June 30,
	2022		2021
	(Dollars in millions)
















Net cash provided by (used in) operating activities	$	242	$	2,330
Cash flows from investing activities:
Sales of fixed maturity securities available-for-sale	6,018		7,235
Maturities of fixed maturity securities available-for-sale	419		545
Sales of equity securities	4		3
Principal payments and sales of mortgage loans	552		417
Principal payments on policy loans	21		12
Purchases of fixed maturity securities available-for-sale	(9,278)		(9,885)
Purchases of equity securities	(5)		(1)
Cash invested in mortgage loans	(834)		(783)
Cash invested in policy loans	(5)		(8)
Cash invested in funds withheld at interest	(4)		(52)

Proceeds from sale of businesses, net of cash transferred of $1 and $43	7		19
Purchases of property and equipment	(12)		(10)
Change in short-term investments	(200)		223
Change in other invested assets	106		112
Net cash provided by (used in) investing activities	(3,211)		(2,173)
Cash flows from financing activities:
Dividends to stockholders	(98)		(95)

Repayment of collateral finance and securitization notes	(29)		(65)


Principal payments of long-term debt	(2)		(401)
Purchases of treasury stock	(27)		(2)

Change in cash collateral for derivative positions and other arrangements	143		184
Change in deposit asset on reinsurance	(32)		—
Deposits on investment-type policies and contracts	3,424		599
Withdrawals on investment-type policies and contracts	(783)		(520)
Distributions to noncontrolling interest	(1)		—
Issuance of preferred interests by subsidiary	90		—
Net cash provided by (used in) financing activities	2,685		(300)
Effect of exchange rate changes on cash	(108)		(11)
Change in cash and cash equivalents	(392)		(154)
Cash and cash equivalents, beginning of period	2,948		3,408
Cash and cash equivalents, end of period	$	2,556	$	3,254
Supplemental disclosures of cash flow information:
Interest paid	$	72	$	85
Income taxes paid (received), net of refunds	$	119	$	185
Non-cash investing activities:
Transfer of invested assets	$	494	$	1,557






Sale of businesses:
Assets disposed, net of cash transferred	$	(6)	$	(512)
Liabilities disposed	$	1	$	504

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

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REINSURANCE GROUP OF AMERICA, INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business and Basis of Presentation

Business

Reinsurance Group of America, Incorporated (“RGA”) is an insurance holding company that was formed on December 31, 1992. RGA and its subsidiaries (collectively, the “Company”) is engaged in providing traditional reinsurance, which includes individual and group life and health, disability, and critical illness reinsurance. The Company also provides financial solutions, which includes longevity reinsurance, asset-intensive products, primarily annuities, financial reinsurance, capital solutions and stable value products.

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s 2021 Annual Report on Form 10-K filed with the SEC on February 25, 2022 (the “2021 Annual Report”).

In the opinion of management, all adjustments, including normal recurring adjustments necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Consolidation

These unaudited condensed consolidated financial statements include the accounts of RGA and its subsidiaries and all intercompany accounts and transactions have been eliminated. Entities in which the Company has significant influence over the operating and financing decisions but are not required to be consolidated are reported under the equity method of accounting.

2. Earnings Per Share

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


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Earnings:
Net income	$	199	$	344	$	136	$	483
Less: Net income attributable to noncontrolling interest	1		—		1		—
Net income available to RGA, Inc. shareholders	$	198	$	344	$	135	$	483
Shares:
Weighted average outstanding shares	67		68		67		68
Equivalent shares from outstanding stock awards	1		1		1		1
Denominator for diluted calculation	68		69		68		69
Earnings per share:
Basic	$	2.95	$	5.06	$	2.01	$	7.11
Diluted	$	2.92	$	5.02	$	2.00	$	7.06

The calculation of common equivalent shares does not include the impact of stock awards with a conversion price that exceeds the average stock price for the earnings period, as the result would be antidilutive. The calculation of common equivalent shares also excludes the impact of outstanding performance contingent shares, as the conditions necessary for their issuance have not been satisfied as of the end of the reporting period. Approximately 1.4 million and 1.6 million stock awards and approximately 0.2 million performance contingent shares were excluded from the calculation of common equivalent shares during the three and six month periods ended June 30, 2022, respectively.

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3. Equity

Common Stock

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


	Issued	Held In Treasury	Outstanding
Balance, December 31, 2021	85,310,598	18,139,868	67,170,730

Issuance of common stock	—	—	—
Common stock acquired	—	219,116	(219,116)
Stock-based compensation (1)	—	(55,654)	55,654
Balance, June 30, 2022	85,310,598	18,303,330	67,007,268


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

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

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

Common Stock Held in Treasury

Common stock held in treasury is accounted for at average cost. Gains resulting from the reissuance of common stock held in treasury are credited to additional paid-in capital. Losses resulting from the reissuance of common stock held in treasury are charged first to additional paid-in capital to the extent the Company has previously recorded gains on treasury share transactions, then to retained earnings.

On January 24, 2019, RGA’s board of directors authorized a share repurchase program for up to $400 million of RGA’s outstanding common stock. During the six months ended June 30, 2022, RGA repurchased 219,116 shares of common stock under this program for $25 million.

On February 25, 2022, RGA’s board of directors authorized a share repurchase program for up to $400 million of RGA’s outstanding common stock. The authorization was effective immediately and does not have an expiration date. In connection with this authorization, the board of directors terminated the stock repurchase authority granted in 2019. During the six months ended June 30, 2022, RGA did not repurchase any shares of common stock under this program.

Noncontrolling Interest

In 2022, Papara Financing LLC (“Papara”), a subsidiary of RGA Reinsurance Company, issued nonconvertible preferred interests to an unaffiliated third party. Papara holds investments in mortgage loans.

The membership interests in Papara consist of (1) common interests, which are held by RGA Reinsurance Company and (2) preferred interests. The preferred interests total $90 million and pay an initial preferred distribution at an annual rate of 2.375% plus three month LIBOR. The applicable rate of interest is reset every five years. Distributions are paid quarterly, if declared by Papara. RGA can call the Papara preferred interests at the issue price beginning five years from the issuance date or upon the receipt of proceeds from the sale of the underlying assets.

The holders of the Papara preferred interests have the option to require redemption upon the occurrence of certain contingent events, such as the failure of Papara to pay the preferred distribution for two or more periods or to meet certain other requirements, including a minimum credit rating. If notice is given upon such an event, all other holders of equal or more subordinate classes of membership interests in Papara are entitled to receive the same form of consideration payable to the holders of the preferred interests, resulting in a deemed liquidation for accounting purposes. The preferred interests are included in noncontrolling interest, and net income attributable to noncontrolling interest was $1 million for the six months ended June 30, 2022.

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Accumulated Other Comprehensive Income (Loss)

The balance of and changes in each component of accumulated other comprehensive income (loss) (“AOCI”) for the six months ended June 30, 2022 and 2021 are as follows (dollars in millions):


	Accumulated Currency Translation Adjustments		Unrealized Appreciation (Depreciation) of Investments(1)		Pension and Postretirement Benefits		Total
Balance, December 31, 2021	$	(9)	$	3,701	$	(50)	$	3,642
Other comprehensive income (loss) before reclassifications	(4)		(9,459)		(3)		(9,466)
Amounts reclassified to (from) AOCI	—		308		2		310
Deferred income tax benefit (expense)	(26)		1,981		—		1,955

Balance, June 30, 2022	$	(39)	$	(3,469)	$	(51)	$	(3,559)


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

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

(1)Includes cash flow hedges of $(206) and $(22) as of June 30, 2022 and December 31, 2021, respectively, and $(40) and $(49) as of June 30, 2021 and December 31, 2020, respectively. See Note 5 – “Derivative Instruments” for additional information on cash flow hedges.

The following table presents the amounts of AOCI reclassifications for the three and six months ended June 30, 2022 and 2021 (dollars in millions):


	Amount Reclassified from AOCI
	Three months ended June 30,				Six months ended June 30,
Details about AOCI Components	2022		2021		2022		2021		Affected Line Item in Statements of Income
Net unrealized investment gains (losses):
Net unrealized gains (losses) on available-for-sale securities	$	(68)	$	26	$	(103)	$	183	Investment related gains (losses), net
Cash flow hedges – Interest rate	(2)		—		(2)		(2)		(1)
Cash flow hedges – Currency/Interest rate	(1)		(4)		(2)		(4)		(1)

Deferred policy acquisition costs attributed to unrealized gains and losses	(99)		19		(201)		(23)		(2)
Total	(170)		41		(308)		154
Provision for income taxes	35		(9)		64		(33)
Net unrealized gains (losses), net of tax	$	(135)	$	32	$	(244)	$	121
Amortization of defined benefit plan items:
Prior service cost (credit)	$	1	$	1	$	1	$	1	(3)
Actuarial gains (losses)	(2)		(3)		(3)		(4)		(3)
Total	(1)		(2)		(2)		(3)
Provision for income taxes	—		1		—		1
Amortization of defined benefit plans, net of tax	$	(1)	$	(1)	$	(2)	$	(2)

Total reclassifications for the period	$	(136)	$	31	$	(246)	$	119

(1)See Note 5 – “Derivative Instruments” for additional information on cash flow hedges.

(2)This AOCI component is included in the computation of the deferred policy acquisition cost. See Note 8 – “Deferred Policy Acquisition Costs” of the 2021 Annual Report for additional details.

(3)This AOCI component is included in the computation of the net periodic pension cost. See Note 10 – “Employee Benefit Plans” for additional details.

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Equity Based Compensation

Equity compensation expense was $17 million and $24 million in the first six months of 2022 and 2021, respectively. In the first quarter of 2022, the Company granted 258,327 stock appreciation rights at $106.53 weighted average exercise price per share, 78,687 performance contingent shares and 219,553 restricted stock units to employees. Additionally, non-employee directors were granted a total of 17,937 shares of common stock. As of June 30, 2022, 1,705,128 share awards at a weighted average strike price per share of $105.83 were vested and exercisable, with a remaining weighted average exercise period of 4.3 years. As of June 30, 2022, the total compensation cost of non-vested awards not yet recognized in the condensed consolidated financial statements was $42 million. It is estimated that these costs will vest over a weighted average period of 0.8 years.

4. Investments

Fixed Maturity Securities Available-for-Sale

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

The following tables provide information relating to investments in fixed maturity securities by type as of June 30, 2022 and December 31, 2021 (dollars in millions):


June 30, 2022:	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total
Available-for-sale:
Corporate	$	37,819	$	43	$	257	$	3,659	$	34,374	64.5	%
Canadian government	3,308		—		536		35		3,809		7.1
RMBS	1,004		—		8		62		950		1.8
ABS	4,091		5		3		307		3,782		7.1
CMBS	1,856		1		2		122		1,735		3.3
U.S. government	1,101		—		7		146		962		1.8
State and political subdivisions	1,202		—		21		107		1,116		2.1
Other foreign government	7,227		6		36		691		6,566		12.3
Total fixed maturity securities	$	57,608	$	55	$	870	$	5,129	$	53,294	100.0	%


December 31, 2021:	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Estimated Fair Value		% of Total
Available-for-sale:
Corporate	$	35,239	$	26	$	3,084	$	194	$	38,103	62.8	%
Canadian government	3,339		—		1,606		1		4,944		8.1
RMBS	1,020		—		37		7		1,050		1.7
ABS	4,024		—		22		41		4,005		6.6
CMBS	1,790		1		66		6		1,849		3.0
U.S. government	2,082		—		31		8		2,105		3.5
State and political subdivisions	1,191		—		137		5		1,323		2.2
Other foreign government	7,188		4		273		87		7,370		12.1
Total fixed maturity securities	$	55,873	$	31	$	5,256	$	349	$	60,749	100.0	%

The Company enters into various collateral arrangements with counterparties that require both the pledging and acceptance of fixed maturity securities as collateral. Pledged fixed maturity securities are included in fixed maturity securities available-for-sale in the condensed consolidated balance sheets. Fixed maturity securities received as collateral are held in separate custodial accounts and are not recorded on the Company’s condensed consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge collateral it receives; however, as of June 30, 2022 and December 31, 2021, none of the collateral received had been sold or repledged. The Company also holds assets in trust to satisfy collateral requirements under derivative transactions and certain third-party reinsurance treaties. The following table includes fixed maturity securities pledged and received as collateral and assets in trust held to satisfy collateral requirements under derivative transactions and certain third-party reinsurance treaties as of June 30, 2022 and December 31, 2021 (dollars in millions):

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	June 30, 2022				December 31, 2021
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities pledged as collateral	$	373	$	335	$	100	$	103
Fixed maturity securities received as collateral	n/a		1,591		n/a		1,922
Assets in trust held to satisfy collateral requirements	30,476		28,080		28,671		31,173

The Company monitors its concentrations of financial instruments on an ongoing basis and mitigates credit risk by maintaining a diversified investment portfolio that limits exposure to any one issuer. The Company’s exposure to concentrations of credit risk from single issuers greater than 10% of the Company’s equity included securities of the U.S. government and its agencies as well as the securities disclosed below, as of June 30, 2022 and December 31, 2021 (dollars in millions).


	June 30, 2022				December 31, 2021
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Fixed maturity securities guaranteed or issued by:
Government of Japan	$	3,031	$	2,755	$	3,080	$	3,063
Canadian province of Quebec	1,390		1,747		1,377		2,347
Canadian province of Ontario	1,047		1,155		1,092		1,451

The amortized cost and estimated fair value of fixed maturity securities classified as available-for-sale as of June 30, 2022, are shown by contractual maturity in the table below (dollars in millions). Actual maturities can differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Structured securities are shown separately in the table below, as they are not due at a single maturity date.


	Amortized Cost		Estimated Fair Value
Available-for-sale:
Due in one year or less	$	1,408	$	1,407
Due after one year through five years	9,847		9,730
Due after five years through ten years	11,466		10,701
Due after ten years	27,936		24,989
Structured securities	6,951		6,467
Total	$	57,608	$	53,294

Corporate Fixed Maturity Securities

The tables below show the major sectors of the Company’s corporate fixed maturity holdings as of June 30, 2022 and December 31, 2021 (dollars in millions):


June 30, 2022:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	14,008	$	12,703	37.0	%
Industrial	19,152		17,526		51.0
Utility	4,659		4,145		12.0

Total	$	37,819	$	34,374	100.0	%

December 31, 2021:			Estimated
	Amortized Cost		Fair Value		% of Total
Finance	$	13,101	$	14,045	36.9	%
Industrial	17,857		19,375		50.8
Utility	4,281		4,683		12.3
Total	$	35,239	$	38,103	100.0	%

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

As discussed in Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2021 Annual Report, allowances for credit losses on fixed maturity securities are recognized in investment related gains (losses), net. The amount recognized represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the fixed maturity security prior to the allowance for credit losses. Any remaining difference between the fair value and amortized cost is recognized in OCI.

The following tables present the rollforward of the allowance for credit losses in fixed maturity securities by type for the six months ended June 30, 2022 and 2021 (dollars in millions):


	Six months ended June 30, 2022
	Corporate		ABS		CMBS		Other Foreign Government		Total
Balance, beginning of period	$	26	$	—	$	1	$	4	$	31
Credit losses recognized on securities for which credit losses were not previously recorded	18		5		—		1		24

Reductions for securities sold during the period	(6)		—		—		(1)		(7)
Additional increases or decreases for credit losses on securities that had an allowance recorded in a previous period	5		—		—		2		7

Balance, end of period	$	43	$	5	$	1	$	6	$	55


	Six months ended June 30, 2021
	Corporate		ABS		CMBS		Other Foreign Government		Total
Balance, beginning of period	$	17	$	—	$	3	$	—	$	20
Credit losses recognized on securities for which credit losses were not previously recorded	2		—		1		4		7
Reductions for securities sold during the period	(8)		—		(2)		—		(10)
Additional increases or decreases for credit losses on securities that had an allowance recorded in a previous period	—		—		(1)		—		(1)
Balance, end of period	$	11	$	—	$	1	$	4	$	16

Unrealized Losses for Fixed Maturity Securities Available-for-Sale

The following tables present the estimated fair value and gross unrealized losses for the 6,103 and 1,862 fixed maturity securities for which an allowance for credit loss has not been recorded as of June 30, 2022 and December 31, 2021, and the estimated fair value had declined and remained below amortized cost (dollars in millions). These investments are presented by class and grade of security, as well as the length of time the related fair value has continuously remained below amortized cost.

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	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
June 30, 2022:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate	$	25,035	$	3,170	$	1,124	$	327	$	26,159	$	3,497
Canadian government	359		29		13		6		372		35
RMBS	631		39		122		23		753		62
ABS	2,850		244		640		45		3,490		289
CMBS	1,523		111		39		4		1,562		115
U.S. government	839		137		24		9		863		146
State and political subdivisions	789		100		27		7		816		107
Other foreign government	4,348		469		795		145		5,143		614
Total investment grade securities	36,374		4,299		2,784		566		39,158		4,865
Below investment grade securities:
Corporate	1,234		137		103		25		1,337		162


ABS	61		9		8		2		69		11
CMBS	29		3		11		1		40		4

Other foreign government	170		28		115		49		285		77
Total below investment grade securities	1,494		177		237		77		1,731		254
Total fixed maturity securities	$	37,868	$	4,476	$	3,021	$	643	$	40,889	$	5,119


	Less than 12 months				12 months or greater				Total
			Gross				Gross				Gross
December 31, 2021:	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Investment grade securities:
Corporate	$	4,135	$	86	$	946	$	51	$	5,081	$	137
Canadian government	20		1		—		—		20		1
RMBS	132		3		102		4		234		7
ABS	1,747		22		589		6		2,336		28
CMBS	152		2		35		2		187		4
U.S. government	1,513		6		31		2		1,544		8
State and political subdivisions	109		3		28		2		137		5
Other foreign government	2,237		33		724		37		2,961		70
Total investment grade securities	10,045		156		2,455		104		12,500		260
Below investment grade securities:
Corporate	463		13		97		44		560		57


ABS	—		—		13		13		13		13
CMBS	—		—		—		—		—		—

Other foreign government	136		7		75		10		211		17
Total below investment grade securities	599		20		185		67		784		87
Total fixed maturity securities	$	10,644	$	176	$	2,640	$	171	$	13,284	$	347

The Company has no intention to sell, nor does it expect to be required to sell, the securities outlined in the tables above, as of the dates indicated. However, unforeseen facts and circumstances may cause the Company to sell fixed maturity securities in the ordinary course of managing its portfolio to meet certain diversification, credit quality and liquidity guidelines. Changes in unrealized losses are primarily driven by changes in interest rates.

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Net Investment Income

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


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Fixed maturity securities available-for-sale	$	559	$	516	$	1,092	$	1,011
Equity securities	1		1		3		3
Mortgage loans	76		73		149		139
Policy loans	14		13		27		27
Funds withheld at interest	57		95		108		179
Short-term investments and cash and cash equivalents	2		—		4		1
Other invested assets – limited partnerships and real estate joint ventures	77		70		238		231
Other invested assets – all other	—		17		2		30
Investment income	786		785		1,623		1,621
Investment expense	(32)		(26)		(59)		(50)
Net investment income	$	754	$	759	$	1,564	$	1,571

Investment Related Gains (Losses), Net

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


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Fixed maturity securities available-for-sale:
Change in allowance for credit losses and impairments	$	(15)	$	5	$	(27)	$	3
Realized gains on investment activity	34		53		45		220
Realized losses on investment activity	(94)		(30)		(130)		(43)
Net gains (losses) on equity securities	(15)		20		(23)		23
Other impairment losses and change in mortgage loan allowance for credit losses	(1)		3		(3)		21
Change in fair value of certain limited partnership investments and other, net	19		32		45		143
Net gains (losses) on derivatives	(182)		29		(287)		47
Total investment related gains (losses), net	$	(254)	$	112	$	(380)	$	414

Securities Borrowing, Lending and Repurchase/Reverse Repurchase Agreements

The following table provides information relating to securities borrowing, lending and repurchase/reverse repurchase agreements as of June 30, 2022 and December 31, 2021 (dollars in millions):


	June 30, 2022			December 31, 2021
	Amortized Cost	Estimated Fair Value		Amortized Cost	Estimated Fair Value
Securities borrowing agreements:
Securities borrowed (1)	n/a	$	676	n/a	$	420
Securities pledged as collateral (2)	529	466		279	290
Securities lending agreements:
Securities loaned (2)	82	81		94	102
Securities received as collateral (3)	n/a	92		n/a	102
Repurchase/reverse repurchase agreements:
Securities pledged (2)	643	593		704	736
Cash (4)	—	—		10	10
Securities received (3)	n/a	565		n/a	728
Cash received (5)	162	162		—	—

(1)Securities borrowed are not reflected on the condensed consolidated balance sheets. Collateral associated with certain borrowed securities is not included within this table as the collateral pledged to the counterparty is the right to reinsurance treaty cash flows.

(2)Securities loaned and pledged to counterparties are included within fixed maturity securities.

(3)Securities received as collateral from counterparties are not reflected on the condensed consolidated financial statements.

(4)A receivable for the cash held by counterparties is included within other assets.

(5)A payable for the cash received by the Company is included within other liabilities.

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The following tables present information on the remaining contractual maturity of the Company’s securities lending and repurchase agreements as of June 30, 2022 and December 31, 2021 (dollars in millions):


	June 30, 2022
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30 – 90 Days		Greater than 90 Days		Total
Securities lending agreements:
Corporate	$	—	$	—	$	—	$	68	$	68
State and political subdivisions	—		—		—		3		3
Other foreign government	—		—		—		10		10
Total	—		—		—		81		81
Repurchase agreements:
Corporate	—		—		51		289		340
Other foreign government	—		—		7		246		253
Total	—		—		58		535		593
Total agreements	$	—	$	—	$	58	$	616	$	674


	December 31, 2021
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30 – 90 Days		Greater than 90 Days		Total
Securities lending agreements:
Corporate	$	—	$	—	$	—	$	94	$	94
State and political subdivisions	—		—		—		3		3
Other foreign government	—		—		—		5		5
Total	—		—		—		102		102
Repurchase agreements:
Corporate	—		—		—		366		366
Other foreign government	—		—		—		370		370
Total	—		—		—		736		736
Total agreements	$	—	$	—	$	—	$	838	$	838

Mortgage Loans

As of June 30, 2022, mortgage loans were geographically dispersed throughout the U.S. with the largest concentrations in California (12.9%), Texas (11.4%) and Washington (8.2%), in addition to loans secured by properties in Canada (3.3%) and United Kingdom (2.4%). The recorded investment in mortgage loans presented below is gross of unamortized deferred loan origination fees and expenses and allowance for credit losses.

The following table presents the distribution of the Company’s recorded investment in mortgage loans by property type as of June 30, 2022 and December 31, 2021 (dollars in millions):


	June 30, 2022				December 31, 2021
Property type:	Carrying Value		% of Total		Carrying Value		% of Total
Office	$	1,729	26.2	%	$	1,683	26.6	%
Retail	2,319		35.1		2,090		33.0
Industrial	1,415		21.5		1,249		19.7
Apartment	776		11.8		801		12.7
Other commercial	355		5.4		506		8.0
Recorded investment	6,594		100.0	%	6,329		100.0	%
Unamortized balance of loan origination fees and expenses	(12)				(11)
Allowance for credit losses	(38)				(35)
Total mortgage loans	$	6,544			$	6,283

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The following table presents the maturities of the Company’s recorded investment in mortgage loans as of June 30, 2022 and December 31, 2021 (dollars in millions):


	June 30, 2022				December 31, 2021
	Recorded Investment		% of Total		Recorded Investment		% of Total
Due within five years	$	2,578	39.1	%	$	2,660	42.0	%
Due after five years through ten years	2,759		41.8		2,593		41.0
Due after ten years	1,257		19.1		1,076		17.0
Total	$	6,594	100.0	%	$	6,329	100.0	%

The following tables set forth certain key credit quality indicators of the Company’s recorded investment in mortgage loans as of June 30, 2022 and December 31, 2021 (dollars in millions):


	Recorded Investment
	Debt Service Ratios						Construction Loans
	>1.20x		1.00x – 1.20x		<1.00x				Total		% of Total
June 30, 2022:
Loan-to-Value Ratio
0% – 59.99%	$	3,350	$	222	$	67	$	10	$	3,649	55.3	%
60% – 69.99%	1,909		196		96		—		2,201		33.4
70% – 79.99%	455		34		40		—		529		8.0
80% or greater	89		—		126		—		215		3.3
Total	$	5,803	$	452	$	329	$	10	$	6,594	100.0	%


	Recorded Investment
	Debt Service Ratios						Construction Loans
	>1.20x		1.00x – 1.20x		<1.00x				Total		% of Total
December 31, 2021:
Loan-to-Value Ratio
0% – 59.99%	$	3,111	$	238	$	51	$	6	$	3,406	53.8	%
60% – 69.99%	1,906		190		46		—		2,142		33.8
70% – 79.99%	520		41		12		—		573		9.1
80% or greater	148		—		60		—		208		3.3
Total	$	5,685	$	469	$	169	$	6	$	6,329	100.0	%

The following table sets forth credit quality grades by year of origination of the Company’s recorded investment in mortgage loans as of June 30, 2022 and December 31, 2021 (dollars in millions):


	Recorded Investment
	Year of Origination
	2022		2021		2020		2019		2018		Prior		Total
June 30, 2022:
Internal credit quality grade:
High investment grade	$	451	$	705	$	373	$	586	$	431	$	1,651	$	4,197
Investment grade	368		313		246		312		271		645		2,155
Average	—		6		—		26		76		98		206
Watch list	—		—		—		—		—		—		—
In or near default	—		—		—		—		—		36		36
Total	$	819	$	1,024	$	619	$	924	$	778	$	2,430	$	6,594

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	Recorded Investment
	Year of Origination
	2021		2020		2019		2018		2017		Prior		Total
December 31, 2021:
Internal credit quality grade:
High investment grade	$	725	$	402	$	645	$	461	$	344	$	1,534	$	4,111
Investment grade	367		272		331		301		296		502		2,069
Average	6		—		27		39		5		32		109
Watch list	—		—		—		—		—		4		4
In or near default	—		—		—		—		—		36		36
Total	$	1,098	$	674	$	1,003	$	801	$	645	$	2,108	$	6,329

The following table presents the current and past due composition of the Company’s recorded investment in mortgage loans as of June 30, 2022 and December 31, 2021 (dollars in millions):


	June 30, 2022		December 31, 2021
Current	$	6,575	$	6,329


Greater than 90 days	19		—

Total	$	6,594	$	6,329

The following table presents information regarding the Company’s allowance for credit losses for mortgage loans for the six months ended June 30, 2022 and 2021 (dollars in millions):


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Balance, beginning of period	$	37	$	47	$	35	$	64
Change in allowance for credit losses	1		(2)		3		(19)
Balance, end of period	$	38	$	45	$	38	$	45

For the six months ended June 30, 2022, the Company restructured three mortgage loans to interest only payments as a result of lower occupancy levels. The total recorded investment before allowance for credit losses for mortgage loans, which were modified and met the criteria of Troubled Debt Restructuring (“TDR”), is $77 million as of June 30, 2022. For the six months ended June 30, 2021, the Company did not have any significant loans that were modified and met the criteria of a TDR. The Company had no mortgage loans that were on a nonaccrual status as of June 30, 2022 and 2021. The Company did not acquire any impaired mortgage loans during six months ended June 30, 2022 and 2021.

Policy Loans

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

Funds Withheld at Interest

As of June 30, 2022, $4.1 billion of the funds withheld at interest balance is primarily associated with two clients. For reinsurance agreements written on a modco basis and certain agreements written on a coinsurance funds withheld basis, assets equal to the net statutory reserves are withheld and legally owned and managed by the ceding company and are reflected as funds withheld at interest. In the event of a ceding company’s insolvency, the Company would need to assert a claim on the assets supporting its reserve liabilities. However, the risk of loss to the Company is mitigated by its ability to offset amounts it owes the ceding company for claims or allowances against amounts owed to the Company from the ceding company.

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Other Invested Assets

Other invested assets include limited partnership interests, joint ventures (other than operating joint ventures), lifetime mortgages, and derivative contracts. Other invested assets also includes FHLB common stock and unit-linked investments, which are included in Other in the table below. As of June 30, 2022 and December 31, 2021, the allowance for credit losses for lifetime mortgages was not material. The carrying values of other invested assets as of June 30, 2022 and December 31, 2021 are as follows (dollars in millions):


	June 30, 2022		December 31, 2021
Limited partnership interests and real estate joint ventures	$	2,074	$	1,996
Lifetime mortgages	812		758
Derivatives	115		175
Other	109		141
Total other invested assets	$	3,110	$	3,070

5. Derivative Instruments

Accounting for Derivative Instruments and Hedging Activities

See Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2021 Annual Report for a detailed discussion of the accounting treatment for derivative instruments, including embedded derivatives. See Note 6 – “Fair Value of Assets and Liabilities” for additional disclosures related to the fair value hierarchy for derivative instruments, including embedded derivatives.

Types of Derivatives Used by the Company

Commonly used derivative instruments include, but are not necessarily limited to: credit default swaps, financial futures, equity options, foreign currency swaps, foreign currency forwards, interest rate swaps, interest rate options, synthetic guaranteed investment contracts (“GICs”), consumer price index (“CPI”) swaps, forward bond purchase commitments, other derivatives and embedded derivatives.

For detailed information on these derivative instruments and the related strategies, see Note 5 – “Derivative Instruments” of the Company’s 2021 Annual Report.

Summary of Derivative Positions

Derivatives, except for embedded derivatives, are included in other invested assets or other liabilities, at fair value. Embedded derivative assets and liabilities on modco or funds withheld arrangements are included on the condensed consolidated balance sheets with the host contract in funds withheld at interest or other liabilities, at fair value. Embedded derivative liabilities on indexed annuity and variable annuity products are included on the condensed consolidated balance sheets with the host contract in interest-sensitive contract liabilities, at fair value. The following table presents the notional amounts and gross fair value of derivative instruments prior to taking into account the netting effects of master netting agreements as of June 30, 2022 and December 31, 2021 (dollars in millions):

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		June 30, 2022						December 31, 2021
	Primary Underlying Risk	Notional		Carrying Value/Fair Value				Notional		Carrying Value/Fair Value
		Amount		Assets		Liabilities		Amount		Assets		Liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	Interest rate	$	1,143	$	23	$	1	$	1,273	$	66	$	1
Interest rate options	Interest rate	2,893		9		—		—		—		—
Financial futures	Equity	227		—		—		240		—		—
Foreign currency swaps	Foreign currency	150		18		—		150		1		—
Foreign currency forwards	Foreign currency	755		—		21		395		2		4
CPI swaps	CPI	524		26		5		563		34		7
Credit default swaps	Credit	1,675		13		39		1,321		29		1
Equity options	Equity	298		43		—		472		29		—
Synthetic GICs	Interest rate	17,317		—		—		16,143		—		—


Embedded derivatives in:
Modco or funds withheld arrangements		—		326		250		—		227		62
Indexed annuity products		—		—		584		—		—		693
Variable annuity products		—		—		160		—		—		162
Total non-hedging derivatives		24,982		458		1,060		20,557		388		930
Derivatives designated as hedging instruments:
Interest rate swaps	Foreign currency/Interest rate	1,338		2		128		941		4		33
Foreign currency swaps	Foreign currency	114		—		—		153		1		—
Foreign currency forwards	Foreign currency	1,170		14		5		1,320		14		11
Forward bond purchase commitments	Interest rate	453		—		100		545		14		1
Total hedging derivatives		3,075		16		233		2,959		33		45
Total derivatives		$	28,057	$	474	$	1,293	$	23,516	$	421	$	975

Fair Value Hedges

The Company designates and reports certain foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets as fair value hedges when they meet the requirements of the general accounting principles for Derivatives and Hedging. The gain or loss on the hedged item attributable to a change in foreign currency and the offsetting gain or loss on the related foreign currency swaps as of June 30, 2022 and 2021 were (dollars in millions):


Type of Fair Value Hedge	Hedged Item	Gains (Losses) Recognized for Derivatives		Gains (Losses) Recognized for Hedged Items
		Investment Related Gains (Losses)
For the three months ended June 30, 2022:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(8)	$	8
For the three months ended June 30, 2021:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(2)	$	2
For the six months ended June 30, 2022:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(1)	$	5
For the six months ended June 30, 2021:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(2)	$	3

Cash Flow Hedges

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

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The following tables present the components of AOCI, before income tax, and the condensed consolidated income statement classification where the gain or loss is recognized related to cash flow hedges for the three and six months ended June 30, 2022 and 2021 (dollars in millions):


	Three months ended June 30,
	2022		2021
Balance, beginning of period	$	(81)	$	(71)
Gains (losses), net deferred in other comprehensive income (loss)	(128)		29

Amounts reclassified to investment income	2		—
Amounts reclassified to interest expense	1		2
Balance, end of period	$	(206)	$	(40)

	Six months ended June 30,
	2022		2021
Balance, beginning of period	$	(22)	$	(49)
Gains (losses), net deferred in other comprehensive income (loss)	(188)		5

Amounts reclassified to investment income	2		—
Amounts reclassified to interest expense	2		4
Balance, end of period	$	(206)	$	(40)

As of June 30, 2022, approximately $4 million of before-tax deferred net gains on derivative instruments recorded in AOCI are expected to be reclassified to interest expense during the next twelve months. For the same time period, there was an immaterial amount of before-tax deferred net gains recorded in AOCI expected to be reclassified to investment income during the next twelve months.

The following table presents the effect of derivatives in cash flow hedging relationships on the condensed consolidated statements of income and the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2022 and 2021 (dollars in millions):


Derivative Type	Gains (Losses) Deferred in OCI		Gains (Losses) Reclassified into Income from AOCI
			Investment Income		Interest Expense
For the three months ended June 30, 2022:
Interest rate	$	(106)	$	—	$	(1)
Foreign currency/interest rate	(22)		(2)		—
Total	$	(128)	$	(2)	$	(1)
For the three months ended June 30, 2021:
Interest rate	$	29	$	—	$	(2)
Foreign currency/interest rate	—		—		—

Total	$	29	$	—	$	(2)

For the six months ended June 30, 2022:
Interest rate	$	(170)	$	—	$	(2)
Foreign currency/interest rate	(18)		(2)		—

Total	$	(188)	$	(2)	$	(2)
For the six months ended June 30, 2021:
Interest rate	$	6	$	—	$	(4)
Foreign currency/interest rate	(1)		—		—

Total	$	5	$	—	$	(4)

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For the three and six months ended June 30, 2022 and 2021, there were no material amounts reclassified into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging.

Hedges of Net Investments in Foreign Operations

The Company uses foreign currency swaps and foreign currency forwards to hedge a portion of its net investment in certain foreign operations against adverse movements in exchange rates. The following table illustrates the Company’s net investments in foreign operations (“NIFO”) hedges and the gains (losses) deferred in OCI for the three and six months ended June 30, 2022 and 2021 (dollars in millions):


	Derivative Gains (Losses) Deferred in OCI
	Three months ended June 30,				Six months ended June 30,
Type of NIFO Hedge	2022		2021		2022		2021
Foreign currency swaps	$	1	$	(2)	$	1	$	(3)
Foreign currency forwards	38		(10)		22		(24)
Total	$	39	$	(12)	$	23	$	(27)

The cumulative foreign currency translation gain recorded in AOCI related to these hedges was $160 million and $137 million at June 30, 2022 and December 31, 2021, respectively. If a hedged foreign operation was sold or substantially liquidated, the amounts in AOCI would be reclassified to the condensed consolidated statements of income. A pro rata portion would be reclassified upon partial sale of a hedged foreign operation. There were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from AOCI into investment income during the periods presented.

Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging

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

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A summary of the effect of non-hedging derivatives, including embedded derivatives, on the Company’s condensed consolidated statements of income for the three and six months ended June 30, 2022 and 2021 is as follows (dollars in millions):


		Three months ended June 30,
Type of Non-hedging Derivative	Income Statement Location of Gain (Loss)	2022		2021
Interest rate swaps	Investment related gains (losses), net	$	(44)	$	33
Interest rate options	Investment related gains (losses), net	(6)		—
Financial futures	Investment related gains (losses), net	24		(9)
Foreign currency swaps	Investment related gains (losses), net	11		3
Foreign currency forwards	Investment related gains (losses), net	(76)		(1)
CPI swaps	Investment related gains (losses), net	(11)		3
Credit default swaps	Investment related gains (losses), net	(33)		12
Equity options	Investment related gains (losses), net	21		(11)


Subtotal		(114)		30
Embedded derivatives in:
Modco or funds withheld arrangements	Investment related gains (losses), net	(56)		16

Indexed annuity products	Interest credited	44		(13)
Variable annuity products	Investment related gains (losses), net	(12)		(17)
Total non-hedging derivatives		$	(138)	$	16

		Six months ended June 30,
Type of Non-hedging Derivative	Income Statement Location of Gain (Loss)	2022		2021
Interest rate swaps	Investment related gains (losses), net	$	(96)	$	(37)
Interest rate options	Investment related gains (losses), net	(6)		—
Financial futures	Investment related gains (losses), net	31		(19)
Foreign currency swaps	Investment related gains (losses), net	18		12
Foreign currency forwards	Investment related gains (losses), net	(99)		(9)
CPI swaps	Investment related gains (losses), net	18		21
Credit default swaps	Investment related gains (losses), net	(91)		32
Equity options	Investment related gains (losses), net	21		(21)


Subtotal		(204)		(21)
Embedded derivatives in:
Modco or funds withheld arrangements	Investment related gains (losses), net	(89)		66

Indexed annuity products	Interest credited	80		1
Variable annuity products	Investment related gains (losses), net	2		1
Total non-hedging derivatives		$	(211)	$	47

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Credit Derivatives

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of credit default swaps sold by the Company at June 30, 2022 and December 31, 2021 (dollars in millions):


	June 30, 2022					December 31, 2021
Rating Agency Designation of Referenced Credit Obligations(1)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps(2)		Weighted Average Years to Maturity(3)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps(2)		Weighted Average Years to Maturity(3)
AAA/AA+/AA/AA-/A+/A/A-
Single name credit default swaps	$	(23)	$	477	17.2	$	28	$	600	14.2
Subtotal	(23)		477		17.2	28		600		14.2
BBB+/BBB/BBB-
Single name credit default swaps	—		158		3.7	1		141		2.4
Credit default swaps referencing indices	(1)		1,015		6.6	—		565		5.1
Subtotal	(1)		1,173		6.2	1		706		4.6
BB+/BB/BB-
Single name credit default swaps	(2)		25		3.7	(1)		15		3.5
Subtotal	(2)		25		3.7	(1)		15		3.5
Total	$	(26)	$	1,675	9.3	$	28	$	1,321	9.0

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

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

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

Netting Arrangements and Credit Risk

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

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

The following table provides information relating to the netting of the Company’s derivative instruments as of June 30, 2022 and December 31, 2021 (dollars in millions):


	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments/ Collateral (1)		Net Amount
June 30, 2022:
Derivative assets	$	148	$	(33)	$	115	$	(115)	$	—
Derivative liabilities	299		(33)		266		(266)		—
December 31, 2021:
Derivative assets	$	194	$	(19)	$	175	$	(175)	$	—
Derivative liabilities	58		(19)		39		(39)		—

(1)Includes initial margin posted to a central clearing partner for financial instruments and excludes the excess of collateral received/pledged from/to the counterparty.

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 June 30, 2022, the Company had credit exposure of $15 million.

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

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derivatives are settled on a daily basis, thereby reducing the credit risk exposure in the event of non-performance by counterparties to such financial instruments.

6. Fair Value of Assets and Liabilities

Fair Value Measurement

General accounting principles for Fair Value Measurements and Disclosures define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. These principles also establish a three-level fair value hierarchy that requires an entity to maximize the use of observable inputs and to minimize the use of unobservable inputs when measuring fair value:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Active markets are defined through various characteristics for the measured asset/liability, such as having many transactions and narrow bid/ask spreads.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or market standard valuation techniques and assumptions that use significant inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the related assets or liabilities and include those whose value is determined using market standard valuation techniques described above. Prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques that require management’s judgment or estimation in developing inputs that are consistent with those other market participants would use when pricing similar assets and liabilities.

For a discussion of the Company’s valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 6 – “Fair Value of Assets and Liabilities” in the Notes to Consolidated Financial Statements included in the Company’s 2021 Annual Report.

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Assets and Liabilities by Hierarchy Level

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are summarized below (dollars in millions):


June 30, 2022:			Fair Value Measurements Using:
	Total		Level 1		Level 2		Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate	$	34,374	$	—	$	30,136	$	4,238
Canadian government	3,809		—		3,809		—
RMBS	950		—		944		6
ABS	3,782		—		2,624		1,158
CMBS	1,735		—		1,652		83
U.S. government	962		862		90		10
State and political subdivisions	1,116		—		1,083		33
Other foreign government	6,566		—		6,530		36
Total fixed maturity securities – available-for-sale	53,294		862		46,868		5,564
Equity securities	127		80		—		47
Funds withheld at interest – embedded derivatives	(174)		—		—		(174)
Funds withheld at interest	62		—		—		62
Cash equivalents	1,156		1,156		—		—
Short-term investments	234		171		42		21
Other invested assets:
Derivatives	115		—		115		—










Other	33		—		33		—
Total other invested assets (1)	148		—		148		—

Total	$	54,847	$	2,269	$	47,058	$	5,520
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives	$	744	$	—	$	—	$	744
Other liabilities:
Funds withheld at interest – embedded derivatives	(250)		—		—		(250)
Derivatives	266		—		266		—








Total	$	760	$	—	$	266	$	494

(1)Other invested assets included in the fair value hierarchy exclude limited partnership interests that are measured at estimated fair value using the net asset value (“NAV”) per share (or its equivalent) as a practical expedient. As of June 30, 2022, the fair value of such investments was $620 million.


December 31, 2021:			Fair Value Measurements Using:
	Total		Level 1		Level 2		Level 3
Assets:
Fixed maturity securities – available-for-sale:
Corporate	$	38,103	$	—	$	34,215	$	3,888
Canadian government	4,944		—		4,944		—
RMBS	1,050		—		1,049		1
ABS	4,005		—		2,908		1,097
CMBS	1,849		—		1,768		81
U.S. government	2,105		1,993		100		12
State and political subdivisions	1,323		—		1,290		33
Other foreign government	7,370		—		7,337		33
Total fixed maturity securities – available-for-sale	60,749		1,993		53,611		5,145
Equity securities	151		101		—		50
Funds withheld at interest – embedded derivatives	104		—		—		104
Funds withheld at interest	83		—		—		83
Cash equivalents	1,138		1,138		—		—
Short-term investments	64		—		36		28
Other invested assets:
Derivatives	175		—		175		—








Other	52		—		52		—


Total other invested assets (1)	227		—		227		—

Total	$	62,516	$	3,232	$	53,874	$	5,410
Liabilities:
Interest-sensitive contract liabilities – embedded derivatives	$	855	$	—	$	—	$	855
Other liabilities:
Funds withheld at interest – embedded derivatives	(61)		—		—		(61)
Derivatives	39		—		39		—










Total	$	833	$	—	$	39	$	794

(1)Other invested assets included in the fair value hierarchy exclude limited partnership interests that are measured at estimated fair value using the NAV per share (or its equivalent) as a practical expedient. As of December 31, 2021, the fair value of such investments was $581 million.

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Quantitative Information Regarding Internally Priced Assets and Liabilities

The following table presents quantitative information about significant unobservable inputs used in Level 3 fair value measurements that are developed internally by the Company as of June 30, 2022 and December 31, 2021 (dollars in millions):


	Estimated Fair Value				Valuation Technique	Unobservable Inputs	Range (Weighted Average)
	June 30, 2022		December 31, 2021				June 30, 2022	December 31, 2021
Assets:
Corporate	$	35	$	49	Market comparable securities	Liquidity premium	1%	0-1% (1%)
						EBITDA Multiple	5.0x-7.0x (6.5x)	5.2x-7.0x (6.4x)
ABS	233		205		Market comparable securities	Liquidity premium	0-18% (3%)	2-18% (4%)
U.S. government	10		12		Market comparable securities	Liquidity premium	0-1% (1%)	0-1% (1%)


Equity securities	6		5		Market comparable securities	EBITDA Multiple	6.9x-11.2x (8.5x)	6.9x-10.6x (8.0x)
Funds withheld at interest – embedded derivatives	61		182		Total return swap	Mortality	0-100% (3%)	0-100% (3%)
						Lapse	0-35% (12%)	0-35% (18%)
						Withdrawal	0-5% (4%)	0-5% (4%)
						CVA	0-5% (0%)	0-5% (0%)
						Crediting rate	1-4% (2%)	1-4% (2%)


Liabilities:
Interest-sensitive contract liabilities – embedded derivatives – indexed annuities	584		693		Discounted cash flow	Mortality	0-100% (3%)	0-100% (2%)
						Lapse	0-35% (11%)	0-35% (16%)
						Withdrawal	0-5% (3%)	0-5% (3%)
						Option budget projection	1-4% (2%)	1-4% (2%)
Interest-sensitive contract liabilities – embedded derivatives – variable annuities	160		162		Discounted cash flow	Mortality	0-100% (2%)	0-100% (2%)
						Lapse	0-25% (4%)	0-25% (4%)
						Withdrawal	0-7% (6%)	0-7% (5%)
						CVA	0-5% (1%)	0-5% (1%)
						Long-term volatility	0-27% (14%)	0-27% (14%)

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Changes in Level 3 Assets and Liabilities

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

For further information on the Company’s valuation processes, see Note 6 – “Fair Value of Assets and Liabilities” in the Notes to Consolidated Financial Statements included in the Company’s 2021 Annual Report.

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


For the three months ended June 30, 2022:	Fixed maturity securities – available-for-sale												Funds withheld at interest –embedded derivatives, net(1)		Funds withheld at interest		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-term investments
Fair value, beginning of period	$	4,046	$	29	$	1,121	$	44	$	48	$	48	$	132	$	75	$	(793)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Net investment income	2		—		—		—		—		—		—		(5)		—
Investment related gains (losses), net	(6)		—		—		—		(5)		1		(56)		—		(12)

Interest credited	—		—		—		—		—		—		—		—		44

Included in other comprehensive income (loss)	(157)		(6)		(73)		(3)		—		(1)		—		(5)		—

Purchases(2)	571		—		207		—		4		1		—		2		—
Sales(2)	(108)		—		—		(1)		—		—		—		—		—
Settlements(2)	(153)		—		(21)		(1)		—		(28)		—		(5)		17
Transfers into Level 3	57		13		32		4		—		—		—		—		—
Transfers out of Level 3	(14)		—		(19)		—		—		—		—		—		—
Fair value, end of period	$	4,238	$	36	$	1,247	$	43	$	47	$	21	$	76	$	62	$	(744)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Net investment income	$	1	$	—	$	—	$	—	$	—	$	—	$	—	$	(5)	$	—
Investment related gains (losses), net	(8)		—		—		—		(5)		—		(56)		—		(13)


Interest credited	—		—		—		—		—		—		—		—		27
Included in other comprehensive income (loss)	(157)		(6)		(73)		(3)		—		—		—		(5)		—

(1)Funds withheld at interest – embedded derivative assets and liabilities are presented net for purposes of the rollforward.

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

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For the six months ended June 30, 2022:	Fixed maturity securities – available-for-sale												Funds withheld at interest –embedded derivatives, net(1)		Funds withheld at interest		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-term investments
Fair value, beginning of period	$	3,888	$	33	$	1,179	$	45	$	50	$	28	$	165	$	83	$	(855)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Net investment income	3		—		—		—		—		—		—		(10)		—
Investment related gains (losses), net	(6)		—		(5)		—		(6)		1		(89)		—		2

Interest credited	—		—		—		—		—		—		—		—		80

Included in other comprehensive income (loss)	(301)		(10)		(145)		(4)		—		(1)		—		(7)		—

Purchases(2)	936		—		302		—		4		21		—		3		(5)
Sales(2)	(124)		—		(51)		(1)		(1)		—		—		—		—
Settlements(2)	(179)		—		(59)		(3)		—		(28)		—		(7)		34
Transfers into Level 3	57		13		45		10		—		—		—		—		—
Transfers out of Level 3	(36)		—		(19)		(4)		—		—		—		—		—
Fair value, end of period	$	4,238	$	36	$	1,247	$	43	$	47	$	21	$	76	$	62	$	(744)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Net investment income	$	2	$	—	$	—	$	—	$	—	$	—	$	—	$	(10)	$	—
Investment related gains (losses), net	(8)		—		(5)		—		(6)		—		(89)				(1)


Interest credited	—		—		—		—		—		—		—		—		45
Included in other comprehensive income (loss)	(301)		(10)		(144)		(4)		—		—		—		(7)		—

(1)Funds withheld at interest – embedded derivative assets and liabilities are presented net for purposes of the rollforward.

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For the three months ended June 30, 2021:	Fixed maturity securities – available-for-sale												Funds withheld at interest – embedded derivatives		Funds withheld at interest		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-term investments
Fair value, beginning of period	$	3,101	$	16	$	388	$	22	$	54	$	11	$	109	$	67	$	(857)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Net investment income	2		—		—		—		—		—		—		(1)		—
Investment related gains (losses), net	2		—		—		—		10		—		16		—		(17)

Interest credited	—		—		—		—		—		—		—		—		(13)

Included in other comprehensive income (loss)	49		—		5		—		—		—		—		—		—

Purchases(1)	317		25		262		—		—		—		—		16		(13)
Sales(1)	(19)		—		(2)		—		(1)		—		—		—		—
Settlements(1)	(269)		—		(24)		(1)		—		(10)		—		(1)		20
Transfers into Level 3	25		—		24		—		—		—		—		—		—
Transfers out of Level 3	—		—		—		—		—		(1)		—		—		—
Fair value, end of period	$	3,208	$	41	$	653	$	21	$	63	$	—	$	125	$	81	$	(880)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Net investment income	$	1	$	—	$	—	$	—	$	—	$	—	$	—	$	(1)	$	—
Investment related gains (losses), net	—		—		—		—		9		—		16		—		(19)


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

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


For the six months ended June 30, 2021:	Fixed maturity securities – available-for-sale												Funds withheld at interest – embedded derivatives		Funds withheld at interest		Interest-sensitive contract liabilities – embedded derivatives
	Corporate		Foreign govt		Structured securities		U.S. and local govt		Equity securities		Short-term investments
Fair value, beginning of period	$	3,029	$	17	$	254	$	23	$	53	$	15	$	58	$	56	$	(907)
Total gains/losses (realized/unrealized)
Included in earnings, net:
Net investment income	3		—		—		—		—		—		—		(6)		—
Investment related gains (losses), net	1		—		—		—		11		—		66		—		1

Interest credited	—		—		—		—		—		—		—		—		1

Included in other comprehensive income (loss)	(33)		(1)		4		—		—		—		1		—		—

Purchases(1)	540		25		428		—		—		—		—		32		(17)
Sales(1)	(20)		—		(2)		—		(1)		—		—		—		—
Settlements(1)	(341)		—		(85)		(2)		—		(10)		—		(1)		42
Transfers into Level 3	29		—		54		—		—		—		—		—		—
Transfers out of Level 3	—		—		—		—		—		(5)		—		—		—
Fair value, end of period	$	3,208	$	41	$	653	$	21	$	63	$	—	$	125	$	81	$	(880)
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net:
Net investment income	$	2	$	—	$	—	$	—	$	—	$	—	$	—	$	(6)	$	—
Investment related gains (losses), net	(1)		—		—		—		10		—		66		—		(3)


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

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Nonrecurring Fair Value Measurements

The Company has certain assets subject to measurement at fair value on a nonrecurring basis, in periods subsequent to their initial recognition if they are determined to be impaired. During the six months ended June 30, 2022 and 2021, the Company did not have any material assets that were measured at fair value due to impairment.

Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of the Company’s financial instruments, which were not measured at fair value on a recurring basis, as of June 30, 2022 and December 31, 2021 (dollars in millions). For additional information regarding the methods and significant assumptions used by the Company to estimate these fair values, see Note 6 – “Fair Value of Assets and Liabilities” in the Notes to Consolidated Financial Statements included in the Company’s 2021 Annual Report. This table excludes any payables or receivables for collateral under repurchase/reverse repurchase agreements and other transactions. The estimated fair value of the excluded amount approximates carrying value as they equal the amount of cash collateral received/paid.


June 30, 2022:	Carrying Value (1)		Estimated Fair Value		Fair Value Measurement Using:
					Level 1		Level 2		Level 3
Assets:
Mortgage loans	$	6,544	$	6,051	$	—	$	—	$	6,051
Policy loans	1,218		1,218		—		1,218		—
Funds withheld at interest	6,519		6,335		—		—		6,335
Cash and cash equivalents	1,400		1,400		1,400		—		—
Short-term investments	38		38		38		—		—
Other invested assets	924		805		5		60		740
Accrued investment income	572		572		—		572		—
Liabilities:
Interest-sensitive contract liabilities	$	21,836	$	21,399	$	—	$	—	$	21,399
Other liabilities – funds withheld at interest	1,610		1,417						1,417
Long-term debt	3,667		3,463		—		—		3,463
Collateral finance and securitization notes	152		129		—		—		129

December 31, 2021:	Carrying Value (1)		Estimated Fair Value		Fair Value Measurement Using:
					Level 1		Level 2		Level 3
Assets:
Mortgage loans	$	6,283	$	6,580	$	—	$	—	$	6,580
Policy loans	1,234		1,234		—		1,234		—
Funds withheld at interest	6,747		7,075		—		—		7,075
Cash and cash equivalents	1,810		1,810		1,810		—		—
Short-term investments	23		23		23		—		—
Other invested assets	910		907		6		70		831
Accrued investment income	533		533		—		533		—
Liabilities:
Interest-sensitive contract liabilities	$	18,625	$	19,540	$	—	$	—	$	19,540
Other liabilities – funds withheld at interest	1,658		1,657		—		—		1,657
Long-term debt	3,667		3,886		—		—		3,886
Collateral finance and securitization notes	180		153		—		—		153

(1)Carrying values presented herein may differ from those in the Company’s condensed consolidated balance sheets because certain items within the respective financial statement captions may be measured at fair value on a recurring basis.

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7. Segment Information

The accounting policies of the segments are the same as those described in Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial Statements included in the Company’s 2021 Annual Report. The Company measures segment performance primarily based on profit or loss from operations before income taxes. There are no intersegment reinsurance transactions and the Company does not have any material long-lived assets.

The Company allocates capital to its segments based on an internally developed economic capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model considers the unique and specific nature of the risks inherent in the Company’s businesses. As a result of the economic capital allocation process, a portion of investment income is attributed to the segments based on the level of allocated capital. In addition, the segments are charged for excess capital utilized above the allocated economic capital basis. This charge is included in policy acquisition costs and other insurance expenses.

The Company has geographic-based and business-based operational segments. Geographic-based operations are further segmented into traditional and financial solutions businesses. Information related to revenues, income (loss) before income taxes and total assets of the Company for each reportable segment are summarized below (dollars in millions).


	Three months ended June 30,				Six months ended June 30,
Revenues:	2022		2021		2022		2021
U.S. and Latin America:
Traditional	$	1,868	$	1,816	$	3,735	$	3,453
Financial Solutions	278		433		530		751
Total	2,146		2,249		4,265		4,204
Canada:
Traditional	367		366		729		709
Financial Solutions	27		26		52		52
Total	394		392		781		761
Europe, Middle East and Africa:
Traditional	447		459		923		916
Financial Solutions	134		139		316		285
Total	581		598		1,239		1,201
Asia Pacific:
Traditional	686		653		1,374		1,300
Financial Solutions	43		104		64		208
Total	729		757		1,438		1,508
Corporate and Other	37		141		94		582
Total	$	3,887	$	4,137	$	7,817	$	8,256


	Three months ended June 30,				Six months ended June 30,
Income (loss) before income taxes:	2022		2021		2022		2021
U.S. and Latin America:
Traditional	$	209	$	135	$	43	$	(203)
Financial Solutions	61		186		105		269
Total	270		321		148		66
Canada:
Traditional	16		32		22		56
Financial Solutions	4		4		17		10
Total	20		36		39		66
Europe, Middle East and Africa:
Traditional	2		(12)		(4)		(80)
Financial Solutions	33		83		118		143
Total	35		71		114		63
Asia Pacific:
Traditional	58		(12)		109		29
Financial Solutions	(66)		31		(122)		59
Total	(8)		19		(13)		88
Corporate and Other	(63)		35		(94)		385
Total	$	254	$	482	$	194	$	668

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Assets:	June 30, 2022		December 31, 2021
U.S. and Latin America:
Traditional	$	21,508	$	20,572
Financial Solutions	26,201		29,028
Total	47,709		49,600
Canada:
Traditional	5,026		5,091
Financial Solutions	34		18
Total	5,060		5,109
Europe, Middle East and Africa:
Traditional	4,506		4,670
Financial Solutions	5,313		7,165
Total	9,819		11,835
Asia Pacific:
Traditional	9,196		10,048
Financial Solutions	9,494		7,678
Total	18,690		17,726
Corporate and Other	3,331		7,905
Total	$	84,609	$	92,175

8. Commitments, Contingencies and Guarantees

Commitments

Funding of Investments

The Company’s commitments to fund investments as of June 30, 2022 and December 31, 2021 are presented in the following table (dollars in millions):


	June 30, 2022		December 31, 2021
Limited partnership interests and joint ventures	$	1,030	$	1,031
Mortgage loans	102		152
Bank loans and private placements	786		768
Lifetime mortgages	96		41

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

The Company has an immaterial liability, included in other liabilities, for expected credit losses associated with unfunded commitments as of June 30, 2022 and December 31, 2021.

Funding Agreements

Federal Home Loan Bank (“FHLB”) of Des Moines

The Company is a member of the FHLB and, through membership, has issued funding agreements to the FHLB in exchange for cash advances. As of June 30, 2022 and December 31, 2021, the Company had $1.2 billion and $1.4 billion, respectively, of FHLB funding agreements outstanding. The Company is required to provide collateral in excess of the funding agreement amounts outstanding, considering any discounts to the securities posted and prepayment penalties.

Funding Agreement Backed Notes

The Company’s Funding Agreement Backed Notes (“FABN”) program allows RGA Global Funding, a special-purpose, unaffiliated statutory trust, to offer its senior secured medium-term notes to investors. RGA Global Funding uses the net proceeds from each sale to purchase one or more funding agreements from the Company. As of June 30, 2022 and December 31, 2021, the Company had $900 million and $500 million, respectively, of FABN agreements outstanding and are included within interest-sensitive contract liabilities.

Contingencies

Litigation

The Company is subject to litigation in the normal course of its business, however, the Company currently has no material litigation. A legal reserve is established when the Company is notified of an arbitration demand or litigation or is notified that

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an arbitration demand or litigation is imminent, it is probable that the Company will incur a loss as a result and the amount of the probable loss is reasonably capable of being estimated.

Other Contingencies

The Company indemnifies its directors and officers as provided in its charters and by-laws. Since this indemnity generally is not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount due under this indemnity in the future.

Guarantees

Statutory Reserve Support

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

In addition, certain subsidiaries have also committed to provide capital support to a third party, in exchange for a fee, by agreeing to assume real estate leases in the event of a severe and prolonged decline in the commercial lease market. Upon assumption of a lease, the Company would recognize a right to use asset and lease obligation.

As of June 30, 2022, the Company does not believe that it will be required to provide any funding under these commitments as the occurrence of the defined events is considered remote. The following table presents the maximum potential obligation for these commitments as of June 30, 2022 (dollars in millions):


Commitment Period:	Maximum Potential Obligation
2034	$	1,243
2035	2,660
2036	3,599
2037	6,850
2038	2,300
2039	7,350
2046	3,000

Other Guarantees

RGA has issued guarantees to third parties on behalf of its subsidiaries for the payment of amounts due under certain securities borrowing and repurchase arrangements, financing arrangements and office lease obligations, whereby, if a subsidiary fails to meet an obligation, RGA or one of its other subsidiaries will make a payment to fulfill the obligation. Additionally, in limited circumstances, treaty guarantees are granted to ceding companies in order to provide them additional security, particularly in cases where RGA’s subsidiary is relatively new, unrated, or not of a significant size, relative to the ceding company. Liabilities supported by the treaty guarantees, before consideration of any legally offsetting amounts due from the guaranteed party are reflected on the Company’s condensed consolidated balance sheets in future policy benefits. Potential guaranteed amounts of future payments will vary depending on production levels and underwriting results. Guarantees related to securities borrowing and repurchase arrangements provide additional security to third parties should a subsidiary fail to provide securities when due. RGA’s guarantees issued as of June 30, 2022 and December 31, 2021, are reflected in the following table (dollars in millions):


	June 30, 2022		December 31, 2021
Treaty guarantees	$	1,946	$	2,208
Treaty guarantees, net of assets in trust	1,139		1,281
Securities borrowing and repurchase arrangements	170		134

9. Income Tax

For the three and six months ended June 30, 2022, the effective tax rate on pre-tax income was 22.1% and 30.1%, respectively. The Company’s effective tax rate for the three and six months ended June 30, 2022, differed from the U.S. statutory rate of 21% primarily due to income earned in jurisdictions with tax rates higher than the U.S., tax bases adjustments, and adjustments to the valuation allowance.

For the three and six months ended June 30, 2021, the effective tax rate on pre-tax income was 28.5% and 27.6%, respectively. The Company’s effective tax rate for the three and six months ended June 30, 2021, differed from the U.S. statutory rate of 21% primarily due to income earned in jurisdictions with tax rates higher than the U.S., state income taxes, and the effect of the enacted UK corporate tax rate increase on the remeasurement of deferred taxes.

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10. Employee Benefit Plans

The components of net periodic benefit cost, included in other operating expenses on the Company’s condensed consolidated statements of income, for the three and six months ended June 30, 2022 and 2021 were as follows (dollars in millions):


	Pension Benefits				Other Benefits
	Three months ended June 30,				Three months ended June 30,
	2022		2021		2022		2021
Service cost	$	4	$	5	$	—	$	1
Interest cost	2		1		1		1
Expected return on plan assets	(3)		(3)		—		—
Amortization of prior service cost (credit)	—		—		(1)		(1)
Amortization of prior actuarial losses	1		2		1		1
Net periodic benefit cost	$	4	$	5	$	1	$	2


	Pension Benefits				Other Benefits
	Six months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Service cost	$	8	$	9	$	1	$	2
Interest cost	3		2		1		1
Expected return on plan assets	(6)		(5)		—		—
Amortization of prior service cost (credit)	—		—		(1)		(1)
Amortization of prior actuarial losses	2		3		1		1
Net periodic benefit cost	$	7	$	9	$	2	$	3

11. Reinsurance Ceded Receivables and Other

Retrocession reinsurance treaties do not relieve the Company from its obligations to direct writing companies. Failure of retrocessionaires to honor their obligations could result in losses to the Company. Consequently, allowances would be established for amounts deemed uncollectible. At June 30, 2022 and December 31, 2021, no allowances were deemed necessary. The Company regularly evaluates the financial condition of the insurance companies from which it assumes and to which it cedes reinsurance.

Retrocessions are arranged through the Company’s retrocession pools for amounts in excess of the Company’s retention limit. As of June 30, 2022 and December 31, 2021, all rated retrocession pool participants followed by the A.M. Best Company were rated “A- (excellent)” or better. The Company verifies retrocession pool participants’ ratings on a quarterly basis. For a majority of the retrocessionaires that were not rated, security in the form of letters of credit or trust assets has been posted. In addition, the Company performs annual financial reviews of its retrocessionaires to evaluate financial stability and performance.

The following table presents information for the Company’s reinsurance ceded receivable assets, including the respective amount and A.M. Best rating for each reinsurer representing in excess of five percent of the total as of June 30, 2022 or December 31, 2021 (dollars in millions):


		June 30, 2022				December 31, 2021
Reinsurer	A.M. Best Rating	Amount		% of Total		Amount		% of Total
Reinsurer A	A-	$	1,611	63.0	%	$	1,626	63.0	%
Reinsurer B	A+	431		16.8		423		16.4
Reinsurer C	A+	208		8.1		212		8.2
Reinsurer D	A	59		2.3		59		2.3
Reinsurer E	A++	47		1.8		42		1.6
Reinsurer F	A+	44		1.7		44		1.7
Other reinsurers		158		6.3		174		6.8
Total		$	2,558	100.0	%	$	2,580	100.0	%

Included in the total reinsurance ceded receivables and other balance were $215 million and $203 million of claims recoverable, of which $10 million and $10 million were in excess of 90 days past due, as of June 30, 2022 and December 31, 2021, respectively. Also included in the total reinsurance ceded receivable and other is a deposit asset on reinsurance of $1,611 million and $1,626 million as of June 30, 2022 and December 31, 2021, respectively.

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12. Policy Claims and Benefits

Rollforward of Claims and Claim Adjustment Expenses

The liability for unpaid claims is reported in future policy benefits and other policy claims and benefits on the Company’s condensed consolidated balance sheets. Activity associated with unpaid claims is summarized below (dollars in millions):


	Six Months Ended June 30,
	2022		2021
Balance, beginning of period	$	8,053	$	7,556
Less: reinsurance recoverable	(556)		(641)
Net balance, beginning of period	7,497		6,915
Incurred:
Current year	6,813		7,631
Prior years	(114)		(122)
Total incurred	6,699		7,509
Payments:
Current year	(2,009)		(2,747)
Prior years	(4,975)		(4,358)
Total payments	(6,984)		(7,105)
Other changes:
Interest accretion	15		20
Foreign exchange adjustments	(233)		(38)
Total other changes	(218)		(18)

Net balance, end of period	6,994		7,302
Plus: reinsurance recoverable	573		674
Balance, end of period	$	7,567	$	7,976

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

13. New Accounting Standards

Changes to the general accounting principles are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates to the FASB Accounting Standards Codification™. Accounting standards updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s condensed consolidated financial statements.

Standards Adopted

For information on the adoption of recent accounting guidance and their impact, if any, on the Company’s results of operations and financial position, see Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2021 Annual Report.

Standards Not Yet Adopted

In the first quarter of 2023, the Company will adopt Accounting Standards Update (“ASU”): ASU 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”). ASU 2018-12 updates certain requirements for the accounting for long-duration insurance contracts.

•Cash flow assumptions and measuring liability for future policy benefits – ASU 2018-12 requires the Company to review its cash flow assumptions at least annually and update, when necessary, with the impact recognized in net income in the period of the change.

Upon adoption, there will be an adjustment to retained earnings as a result of capping the net premium ratio at 100% and eliminating negative reserves on certain issue year cohorts.

•Discount rate – The discount rate assumption is prescribed by ASU 2018-12 as an upper-medium (low credit risk) fixed-income yield and is required to be updated every quarter. The change in the liability as a result of updating the discount rate assumption is recognized in other comprehensive income (loss) (“OCI”).

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Upon adoption, there will be an adjustment to accumulated other comprehensive income (loss) as a result of remeasuring in force contract liabilities using current upper-medium grade fixed income instrument yields. The adjustment will largely reflect the difference between discount rates locked-in at contract inception versus current discount rates at transition.

•Deferred policy acquisition costs and similar balances – Deferred policy acquisition costs (“DAC”) and other capitalized costs such as unearned revenue are amortized on a constant level or straight-line basis over the expected term of the contracts.

Upon adoption, the Company expects an adjustment to accumulated other comprehensive income (loss) for the removal of cumulative adjustments to DAC associated with unrealized gains and losses previously recorded in accumulated other comprehensive income (loss).

•Market risk benefits – Market risk benefits, which are contracts or contract features that provide protection to the policyholder from capital market risk and expose the Company to other-than-nominal capital market risk, are measured at fair value. The periodic change in fair value is recognized in net income with the exception of the periodic change in fair value related to the instrument-specific credit risk, which is recognized in OCI.

Upon adoption, the Company expects an impact to (1) accumulated other comprehensive income (loss) for the cumulative effect of changes in the instrument-specific credit risk between contract issue date and transition date and (2) retained earnings for the difference between fair value and carrying value at the transition date, excluding the changes in the instrument-specific credit risk.

The updated guidance for the cash flow assumptions, discount rate and deferred policy acquisition costs will be applied on a modified retrospective method as of the earliest period included in the financial statements; that is, to contracts in force as of January 1, 2021. The guidance for market risk benefits will be applied retrospectively as of January 1, 2021.

The Company estimates the adoption of the new guidance will decrease previously reported retained earnings by approximately $1.0 billion to $1.3 billion, net of tax, and accumulated other comprehensive income (loss) by approximately $5.1 billion to $7.1 billion, net of tax, as of the transition date of January 1, 2021. In addition, the Company estimates the adoption of the new guidance will decrease previously reported retained earnings by approximately $0.5 billion to $0.8 billion, net of tax, and accumulated other comprehensive income (loss) by approximately $3.2 billion to $5.2 billion, net of tax, as of December 31, 2021. All amounts assume a tax rate of 24 percent. While the Company has substantially completed the necessary updates to its valuation models and other systems to implement the standard, the Company’s implementation of the new guidance is ongoing. The actual impact of adoption, including the actual tax rate, will be updated as the model validation, system testing and parallel runs continue through the remainder of 2022; therefore, the Company’s estimates are subject to change.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, among others, statements relating to projections of the future operations, strategies, earnings, revenues, income or loss, ratios, 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 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, including Long Duration Targeted Improvement accounting changes, and (28) 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 2021 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 $84.6 billion as of June 30, 2022. Traditional reinsurance includes individual and group life and health, disability, and critical illness reinsurance. Financial solutions includes longevity reinsurance, asset-intensive reinsurance, capital solutions, including financial reinsurance, and stable value products. The Company derives revenues primarily from renewal premiums from existing reinsurance treaties, new business premiums from existing or new reinsurance treaties, fee income from financial solutions business and income earned on invested assets.

Historically, the Company’s primary business has been traditional life reinsurance, which involves reinsuring life insurance policies that are often in force for the remaining lifetime of the underlying individuals insured, with premiums earned typically over a period of 10 to 30 years. To a lesser extent, the Company also reinsures health business typically reinsured for one to three years. Each year, however, a portion of the business under existing treaties terminates due to, among other things, lapses or voluntary surrenders of underlying policies, deaths of insureds, and the exercise of recapture options by ceding companies. The Company has expanded its financial solutions business, including significant asset-intensive and longevity risk transactions, which allow its clients to take advantage of growth opportunities and manage their capital, longevity and investment risk.

For its traditional life business, the Company’s 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 2021 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

Although global COVID-19 related deaths have begun to decline, the Company continues to experience increased claim costs, primarily in the first quarter of 2022, as a result of the COVID-19 global pandemic. However, the Company cannot reliably predict the future impact the ongoing pandemic will have on its business, results of operations and financial condition as the impact will depend on, among other factors, the severity of new variants of the virus, vaccination effectiveness, country-specific circumstances, and COVID-19’s indirect impact on mortality and morbidity.

The ultimate amount and timing of claims the Company will experience as a result of the COVID-19 pandemic will depend 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, 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 latest external data and the Company’s claim experience to date and are subject to the many variables and uncertainties noted above. The U.S. continues to be the key driver of mortality claim costs followed by Canada and the UK. For the six months ended June 30, 2022, the Company estimates it has incurred approximately $316 million of COVID-19 related life and health claim costs, including amounts incurred but not reported, with approximately $258 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., 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.

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Results from Operations – 2022 compared to 2021

The following table summarizes net income for the periods presented.


	Three months ended June 30,						Six months ended June 30,
	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:	(Dollars in millions, except per share data)
Net premiums	$	3,230	$	3,098	$	132	$	6,385	$	6,012	$	373
Investment income, net of related expenses	754		759		(5)		1,564		1,571		(7)




Investment related gains (losses), net	(254)		112		(366)		(380)		414		(794)
Other revenues	157		168		(11)		248		259		(11)
Total revenues	3,887		4,137		(250)		7,817		8,256		(439)
Benefits and Expenses:
Claims and other policy benefits	2,815		2,813		2		6,040		6,005		35
Interest credited	138		218		(80)		279		364		(85)
Policy acquisition costs and other insurance expenses	393		339		54		748		672		76
Other operating expenses	243		240		3		469		454		15
Interest expense	42		43		(1)		84		88		(4)
Collateral finance and securitization expense	2		2		—		3		5		(2)
Total benefits and expenses	3,633		3,655		(22)		7,623		7,588		35
Income before income taxes	254		482		(228)		194		668		(474)
Provision for income taxes	55		138		(83)		58		185		(127)
Net income	199		344		(145)		136		483		(347)
Net income attributable to noncontrolling interest	$	1	$	—	1		$	1	$	—	1
Net income available to RGA, Inc. shareholders	$	198	$	344	$	(146)	$	135	$	483	$	(348)
Earnings per share:
Basic earnings per share	$	2.95	$	5.06	$	(2.11)	$	2.01	$	7.11	$	(5.10)
Diluted earnings per share	$	2.92	$	5.02	$	(2.10)	$	2.00	$	7.06	$	(5.06)

Three months ended June 30, 2022 compared to three months ended June 30, 2021

The decrease in income for the three months ended June 30, 2022, was primarily the result of:

•Changes in the fair value of derivative instruments included in investment related gains (losses), net. During the three and six month periods ended June 30, 2022, the fair value of these instruments decreased by $114 million and $204 million, compared to an increase (decrease) of $30 million and $(21) million during the three and six months ended June 30, 2021, respectively.

•Changes in the fair value of embedded derivatives, associated with modco/funds withheld treaties, decreased investment related gains by $56 million for the three months ended June 30, 2022, compared to an increase of $16 million for the three month period June 30, 2021.

•$60 million, pre-tax, of net realized losses, included in investment related gains (losses), net associated with portfolio repositioning compared to $23 million of net realized gains recognized in the prior year.

Six months ended June 30, 2022 compared to six months ended June 30, 2021

The decrease in income for the six months ended June 30, 2022, was primarily the result of:

•Changes in the fair value of embedded derivatives, associated with modco/funds withheld treaties, decreased investment related gains by $89 million for the six months ended June 30, 2022, compared to an increase of $66 million for the six months ended June 30, 2021.

•$85 million, pre-tax, of net realized losses, included in investment related gains (losses), net associated with portfolio repositioning compared to $177 million of net realized gains recognized in the prior year.

•The prior year benefited from 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.

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Foreign currency fluctuations can result in variances in financial statement line items. Foreign currency increased income before taxes for the three and six month periods ended June 30, 2022, by $7 million and $13 million, respectively, primarily due to the weakening of the Japanese Yen compared to the U.S. Dollar. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Premiums and business growth

The increase in premiums during the three and six month period ended June 30, 2022, is primarily due to new business production. Consolidated assumed life reinsurance in force decreased from $3,471.7 billion as of June 30, 2021, to $3,380.9 billion as of June 30, 2022, due to changes in foreign exchange rates partially offset by new business production. The Company added new business production, measured by face amount of reinsurance in force, of $215.7 billion and $220.9 billion during the six months ended June 30, 2022 and 2021, respectively.

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

The decrease 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, partially offset by an increase in the average invested asset base and yield:

•The average invested assets at amortized cost, excluding spread business, was $34.9 billion for the six months ended June 30, 2022, compared to $33.3 billion for the six months ended June 30, 2021.

•The average yield earned on investments, excluding spread related business, was 4.63% and 4.64% for the three month periods ended June 30, 2022 and 2021, respectively, and 4.96% and 5.15% for the six months ended June 30, 2022 and 2021, respectively.

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

•During the three and six months ended June 30, 2022, the Company repositioned its portfolio generating capital losses of $60 million and $85 million, respectively, compared to net capital gains of $23 million and $177 million during the three and six months ended June 30, 2021, respectively.

•The Company uses various derivative instruments such as interest rate swaps, credit default swaps and foreign exchange forwards for risk management purposes that either do not qualify or have not been elected for hedge accounting treatment. Changes in the fair value of these instruments are included in investment related gains (losses), net. During the three and six months periods ended June 30, 2022, the fair value of these instruments decreased by $114 million and $204 million, compared to an increase (decrease) of $30 million and $(21) million during the three and six months ended June 30, 2021, respectively. See Note 5 – “Derivative Instruments” in the Notes to Condensed Consolidated Financial Statements for additional information.

•Changes in the fair value of embedded derivatives, associated with modco/funds withheld treaties, decreased investment related gains (losses), net by $56 million and $89 million for the three and six month periods ended June 30, 2022, respectively, compared to an increase of $16 million and $66 million for the three and six month periods ended June 30, 2021.

•The Company incurred $15 million and $27 million of impairments and change in allowance for credit losses on fixed maturity securities during the three and six month periods ended June 30, 2022, respectively, compared to a decrease of $5 million and $3 of impairments and change in allowance for credit losses during the three and six month periods ended June 30, 2021, respectively.

•Investment related gains (losses), net, for the first six months of 2021 included the adjustment previously discussed to investments in limited partnerships considered to be investment companies, which should have been recognized in prior periods, of $70 million pre-tax to adjust the carrying value from cost less impairments to the fair value approach, using the net asset value (“NAV”) per share or its equivalent.

The effective tax rate on a consolidated basis was 22.1% and 28.5% for the three months ended June 30, 2022 and 2021, respectively, and 30.1% and 27.6% for the six months ended June 30, 2022 and 2021, respectively. See Note 9 – “Income Tax”

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in the Notes to Condensed Consolidated Financial Statements for additional information on the Company’s consolidated effective tax rates.

Impact of certain derivatives

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Modco/Funds withheld:
Unrealized gains (losses)	$	(56)	$	16	$	(72)	$	(89)	$	66	$	(155)
Deferred acquisition costs/retrocession	31		(7)		38		51		(23)		74
Net effect	(25)		9		(34)		(38)		43		(81)
EIAs:
Unrealized gains (losses)	27		3		24		44		33		11
Deferred acquisition costs/retrocession	(12)		(1)		(11)		(20)		(17)		(3)
Net effect	15		2		13		24		16		8
Guaranteed minimum benefit riders:
Unrealized gains (losses)	(11)		(16)		5		2		1		1
Related freestanding derivatives, net of deferred acquisition costs/retrocession	1		20		(19)		(27)		(33)		6
Net effect	(10)		4		(14)		(25)		(32)		7
Total net effect after freestanding derivatives	$	(20)	$	15	$	(35)	$	(39)	$	27	$	(66)

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Results of Operations by Segment

U.S. and Latin America Operations

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 June 30,						Six Months Ended June 30,
(dollars in millions)	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	1,645	$	1,593	$	52	$	3,201	$	3,025	$	176
Investment income, net of related expenses	461		509		(48)		1,028		974		54
Investment related gains (losses), net	(74)		31		(105)		(139)		31		(170)
Other revenues	114		116		(2)		175		174		1
Total revenues	2,146		2,249		(103)		4,265		4,204		61
Benefits and expenses:
Claims and other policy benefits	1,431		1,439		(8)		3,244		3,239		5
Interest credited	118		200		(82)		242		331		(89)
Policy acquisition costs and other insurance expenses	268		238		30		517		469		48
Other operating expenses	59		51		8		114		99		15
Total benefits and expenses	1,876		1,928		(52)		4,117		4,138		(21)
Income before income taxes	$	270	$	321	$	(51)	$	148	$	66	$	82

The decrease in income before income taxes in the second quarter of 2022 was primarily driven by a decrease in investment related gains (losses) in the Financial Solutions segment, as well as a decrease in the fair value of the embedded derivative associated with modco/funds withheld treaties. The decrease was partially offset by favorable claims experience within the Individual Mortality line of business. The increase in income before income taxes for the first six months of 2022 is attributable primarily to higher investment income related to strong variable investment income in the first quarter combined with increases in net premiums, and favorable claims experience within the Individual Mortality line of business. Partially offsetting the six month increases were decreases in investment related gains (losses) and a decrease in the fair value of the embedded derivative associated with modco/funds withheld treaties.

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Traditional Reinsurance


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			2022 vs 2021		2022			2021			2022 vs 2021
Revenues:
Net premiums	$	1,631		$	1,578		$	53	$	3,172		$	2,997		$	175
Investment income, net of related expenses	209			233			(24)		513			440			73
Investment related gains (losses), net	19			1			18		34			7			27
Other revenues	9			4			5		16			9			7
Total revenues	1,868			1,816			52		3,735			3,453			282
Benefits and expenses:
Claims and other policy benefits	1,389			1,418			(29)		3,154			3,158			(4)
Interest credited	17			18			(1)		34			35			(1)
Policy acquisition costs and other insurance expenses	208			206			2		416			388			28
Other operating expenses	45			39			6		88			75			13
Total benefits and expenses	1,659			1,681			(22)		3,692			3,656			36
Income (loss) before income taxes	$	209		$	135		$	74	$	43		$	(203)		$	246
Key metrics:
Life reinsurance in force									$1,650.5 billion			$1,619.4 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	85.2		%	89.9		%			99.4		%	105.4		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	12.8		%	13.1		%			13.1		%	12.9		%
Other operating expenses as a percentage of net premiums	2.8		%	2.5		%			2.8		%	2.5		%

The increase in income before income taxes in the second quarter for the U.S. and Latin America Traditional segment was primarily the result of favorable claims experience within the Individual Mortality business, partially offset by less favorable claims experience within the U.S. Group and Latin American markets. The increase in income before taxes for the first six months was primarily the result of higher investment income related to variable investment income, increased premium, and favorable claims experience within the Individual Mortality business, partially offset by less favorable claims experience within the U.S. Group and Latin American markets.

Revenues

•The increase in net premiums of $53 million for the second quarter was primarily due to organic growth as well as new sales. The increase in net premiums for the six month period was primarily due to organic growth and new sales of $95 million, as well as $47 million in restructuring of a transaction that was previously recognized as a low risk or deposit transaction in Latin America and $33 million related to the partial recapture of a large reinsurance transaction in the second quarter of 2021. The segment added new life business production, measured by face amount of reinsurance in force, of $32.7 billion and $35.7 billion during the second quarter of 2022 and 2021, respectively, and $72.2 billion and $64.2 billion during the first six months of 2022 and 2021, respectively.

•The decrease in net investment income for the three month period ended June 30, 2022, was primarily due to lower variable investment income. The increase in net investment income for the six month period was primarily the result of higher variable investment income associated with investments in real estate joint ventures, limited partnerships, and private equity funds.

Benefits and expenses

•The decreases in the loss ratio for the three and six months ended June 30, 2022, as compared to the same periods in 2021, were primarily due to favorable COVID-19 and non-COVID-19 experience, mainly within the Individual Mortality line of business. While the cause of death is not yet available for all claims, the Company estimates that approximately $258 million of claims for the six months ended June 30, 2022, were attributable to COVID-19.

•The increase in policy acquisition costs and other insurance expenses as a percentage of net premiums for the six months ended June 30, 2022, was primarily attributable to the restructure of a transaction in Latin America.

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Financial Solutions


For the three months ended June 30,	2022						2021						2022 vs 2021
	Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total
(dollars in millions)
Revenues:
Net premiums	$	14	$	—	$	14	$	15	$	—	$	15	$	(1)	$	—	$	(1)
Investment income, net of related expenses	251		1		252		276		—		276		(25)		1		(24)
Investment related gains (losses), net	(93)		—		(93)		30		—		30		(123)		—		(123)
Other revenues	31		74		105		85		27		112		(54)		47		(7)
Total revenues	203		75		278		406		27		433		(203)		48		(155)
Benefits and expenses:
Claims and other policy benefits	42		—		42		21		—		21		21		—		21
Interest credited	101		—		101		182		—		182		(81)		—		(81)
Policy acquisition costs and other insurance expenses	59		1		60		32		—		32		27		1		28
Other operating expenses	12		2		14		8		4		12		4		(2)		2
Total benefits and expenses	214		3		217		243		4		247		(29)		(1)		(30)
Income before income taxes	$	(11)	$	72	$	61	$	163	$	23	$	186	$	(174)	$	49	$	(125)


For the six months ended June 30,	2022						2021						2022 vs 2021
	Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total		Asset-Intensive		Capital Solutions		Total
(dollars in millions)
Revenues:
Net premiums	$	29	$	—	$	29	$	28	$	—	$	28	$	1	$	—	$	1
Investment income, net of related expenses	513		2		515		533		1		534		(20)		1		(19)
Investment related gains (losses), net	(173)		—		(173)		24		—		24		(197)		—		(197)
Other revenues	58		101		159		111		54		165		(53)		47		(6)
Total revenues	427		103		530		696		55		751		(269)		48		(221)
Benefits and expenses:
Claims and other policy benefits	90		—		90		81		—		81		9		—		9
Interest credited	208		—		208		296		—		296		(88)		—		(88)
Policy acquisition costs and other insurance expenses	99		2		101		79		2		81		20		—		20
Other operating expenses	21		5		26		17		7		24		4		(2)		2
Total benefits and expenses	418		7		425		473		9		482		(55)		(2)		(57)
Income before income taxes	$	9	$	96	$	105	$	223	$	46	$	269	$	(214)	$	50	$	(164)

Asset-Intensive Reinsurance

The decreases in income before income taxes for U.S. and Latin America Financial Solutions’ Asset-intensive segment for the three and six months ended June 30, 2022, were primarily due to higher investment related losses, net in coinsurance portfolios and the decrease in fair value of the embedded derivatives related to modco/funds withheld treaties.

The invested asset base, at amortized cost, supporting this segment decreased to $23.8 billion as of June 30, 2022, from $26.7 billion as of June 30, 2021.

•The decrease in the asset base was primarily due to $1.6 billion of retrocessions completed in the second half of 2021 and net run off in existing in force transactions.

•As of June 30, 2022 and 2021, $4.3 billion and $4.8 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 June 30,				Six months ended June 30,
	2022		2021		2022		2021
Revenues:
Total revenues	$	203	$	406	$	427	$	696
Less:
Embedded derivatives – modco/funds withheld treaties	(75)		14		(123)		59
Guaranteed minimum benefit riders and related free standing derivatives	(5)		—		(28)		(65)
Revenues before certain derivatives	283		392		578		702
Benefits and expenses:
Total benefits and expenses	214		243		418		473
Less:
Embedded derivatives – modco/funds withheld treaties	(31)		6		(51)		23
Guaranteed minimum benefit riders and related free standing derivatives	5		(4)		(3)		(33)
Equity-indexed annuities	(15)		(2)		(24)		(16)
Benefits and expenses before certain derivatives	255		243		496		499
Income before income taxes:
Income before income taxes	(11)		163		9		223
Less:
Embedded derivatives – modco/funds withheld treaties	(44)		8		(72)		36
Guaranteed minimum benefit riders and related free standing derivatives	(10)		4		(25)		(32)
Equity-indexed annuities	15		2		24		16
Income before income taxes and certain derivatives	$	28	$	149	$	82	$	203

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 three and six months ended June 30, 2022 and 2021.

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 $(44) million and $8 million for the second quarter and $(72) million and $36 million for the six months ended June 30, 2022 and 2021, respectively. The decrease in revenue for the second quarter and six months ended June 30, 2022, was primarily driven by the impact of higher interest rates of $(56) million and $(87) million and the impact of widening credit spreads of $(30) million and $(56) million, respectively, on the fair value calculation. The revenue for the second quarter ended June 30, 2021, was primarily due to natural run-off of the funds withheld. The revenue for the six months ended June 30, 2021, was primarily driven by tightening credit spreads of $71 million.

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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 $2 million and $(8) million for the second quarters of 2022 and 2021, respectively, and $(11) million and $(63) million for the six months ended June 30, 2022 and 2021, 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 $(10) million and $4 million for the second quarter and $(25) million and $(32) million for the six months ended June 30, 2022 and 2021, respectively. The revenue for the three months ended June 30, 2022, was primarily driven by higher interest rates of $(8) million, net of hedging. The decrease in income for the six months ended June 30, 2022, was primarily due to higher interest rates of $(9) million, net of hedging and an $(11) million 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. The revenue for the six months ended June 30, 2021, was primarily driven by a $(63) million 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.

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 income before income taxes by $15 million and $2 million for the second quarters of 2022 and 2021, respectively, and $24 million and $16 million for the six months ended June 30, 2022 and 2021, respectively. The increase in income for the second quarter and first six months of 2022 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 decreased by $121 million for both the three and six months ended June 30, 2022, as compared to the same periods in 2021. The decrease for the three months ended June 30, 2022, was primarily due to a $(61) million decrease in investment related gains (losses), net in coinsurance and funds withheld portfolios. Additionally, the prior period included a one-time fee of $34 million associated with a new transaction and favorable prior year policyholder experience including impacts from COVID-19 of $13 million. The decrease for the six months ended June 30, 2022, was primarily due to $(88) million lower investment related gains (losses), net in coinsurance and funds withheld portfolios, partially offset by $22 million of higher variable investment income. Additionally, the prior period included a one-time fee of $34 million associated with a new transaction and favorable prior year policyholder experience including impacts from COVID-19 of $13 million.

•Revenue before certain derivatives decreased by $109 million and by $124 million for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021. The decrease for the three months ended June 30, 2022, was primarily due to a $(39) million change in the fair value of equity options associated with the reinsurance of EIAs and $(33) million decrease in investment related gains (losses), net in coinsurance and funds withheld portfolios. Additionally, the prior period included a one-time fee of $34 million associated with a new transaction. The decrease for the six months ended June 30, 2022, was primarily due to $(72) million change in fair value of equity options associated with the reinsurance of EIAs and $(58) million decrease in investment related gains (losses), net in coinsurance and funds withheld portfolios, partially offset by $28 million of higher variable investment income. Additionally, the prior period included a one-time fee of $34 million associated with a new transaction. The effect on investment income related to equity options is substantially offset by a corresponding change in interest credited.

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•Benefits and expenses before certain derivatives increased (decreased) by $12 million and $(3) million for the three and six months ended June 30, 2022, as compared to the same period in 2021. The increase in the second quarter of 2022 was primarily due to $23 million higher amortization of deferred acquisition costs associated with investment related gains (losses), net in coinsurance and funds withheld portfolios and a $14 million increase in other insurance expenses related to a funds withheld transaction which is retroceded to a third party. These expense increases were partially offset by $38 million lower interest credited associated with reinsurance of EIAs. Additionally, the prior period included favorable policyholder experience including impacts from COVID-19 of $13 million. The decrease in the first six months of 2022 was due to $70 million lower interest credited associated with the reinsurance of EIAs, and favorable policyholder experience of $13 million in the prior year. The effect on interest credited related to equity options is substantially offset by a corresponding increase in investment income. The decreases in interest credited and policyholder benefits was partially offset by $24 million higher amortization of deferred acquisition costs associated with investment related gains (losses), net in coinsurance and funds withheld portfolios and a $24 million in other insurance expenses related to a funds withheld transactions which is retroceded to a third party.

Capital Solutions

Income before income taxes for the U.S. and Latin America Capital Solutions’ business increased $49 million, or 213.0%, and $50 million, or 108.7%, for the three and six months ended June 30, 2022, as compared to the same periods in 2021. The increase was primarily due to a recapture fee earned on a terminated transaction. Fees earned from this business can vary significantly depending on the size of the transactions and the timing of their completion and therefore can fluctuate from period to period.

•At June 30, 2022 and 2021, the amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial structures was $24.1 billion and $22.3 billion, respectively.

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 June 30,						Six Months Ended June 30,
(dollars in millions)	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	339	$	324	$	15	$	666	$	627	$	39
Investment income, net of related expenses	57		63		(6)		113		123		(10)
Investment related gains (losses), net	(6)		—		(6)		(5)		2		(7)
Other revenues	4		5		(1)		7		9		(2)
Total revenues	394		392		2		781		761		20
Benefits and expenses:
Claims and other policy benefits	317		298		19		628		582		46
Interest credited	—		—		—		—		—		—
Policy acquisition costs and other insurance expenses	46		47		(1)		93		92		1
Other operating expenses	11		11		—		21		21		—
Total benefits and expenses	374		356		18		742		695		47
Income before income taxes	$	20	$	36	$	(16)	$	39	$	66	$	(27)

•The decreases in income before income taxes for the three and six months ended June 30, 2022, as compared to the same periods in 2021, were primarily due to unfavorable claims experience in the individual mortality line of business and lower investment income, partially offset by favorable claims experience in the creditor line of business and favorable longevity experience.

•Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in a decrease in income before incomes taxes of $1 million for both the three and six months ended June 30, 2022. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Table of Contents

Traditional Reinsurance


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			2022 vs 2021		2022			2021			2022 vs 2021
Revenues:
Net premiums	$	314		$	301		$	13	$	618		$	581		$	37
Investment income, net of related expenses	58			63			(5)		113			123			(10)
Investment related gains (losses), net	(6)			—			(6)		(5)			2			(7)
Other revenues	1			2			(1)		3			3			—
Total revenues	367			366			1		729			709			20
Benefits and expenses:
Claims and other policy benefits	295			277			18		595			543			52
Interest credited	—			—			—		—			—			—
Policy acquisition costs and other insurance expenses	46			46			—		92			91			1
Other operating expenses	10			11			(1)		20			19			1
Total benefits and expenses	351			334			17		707			653			54
Income (loss) before income taxes	$	16		$	32		$	(16)	$	22		$	56		$	(34)
Key metrics:
Life reinsurance in force									$477.2 billion			$468.3 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	93.9		%	92.0		%			96.3		%	93.5		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	14.6		%	15.3		%			14.9		%	15.7		%
Other operating expenses as a percentage of net premiums	3.2		%	3.7		%			3.2		%	3.3		%

The decreases in income before income taxes for the three and six months ended June 30, 2022, were primarily due to unfavorable claims experience in the individual mortality line of business and lower investment income, partially offset by favorable claims experience in the creditor line of business.

Revenues

•The segment added new life business production, measured by face amount of reinsurance in force, of $12.8 billion and $8.5 billion for the second quarter of 2022 and 2021, respectively, and $25.5 billion, and $22.7 billion during the first six months of 2022 and 2021, respectively.

•The decreases in net investment income for the three and six months ended June 30, 2022, were primarily due to decreased variable investment income, partially offset by an increase in the invested asset base.

Benefits and expenses

•The increases in the loss ratio for the three and six months ended June 30, 2022, as compared to the same periods in 2021, were primarily due to unfavorable claims experience in the individual mortality line of business. While the cause of death is not yet available for all claims, the Company estimates that approximately $22 million of claims for the six months ended June 30, 2022, were attributable to COVID-19.

Financial Solutions


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	25	$	23	$	2	$	48	$	46	$	2
Investment income, net of related expenses	(1)		—		(1)		—		—		—
Investment related gains (losses), net	—		—		—		—		—		—
Other revenues	3		3		—		4		6		(2)
Total revenues	27		26		1		52		52		—
Benefits and expenses:
Claims and other policy benefits	22		21		1		33		39		(6)
Interest credited	—		—		—		—		—		—
Policy acquisition costs and other insurance expenses	—		1		(1)		1		1		—
Other operating expenses	1		—		1		1		2		(1)
Total benefits and expenses	23		22		1		35		42		(7)
Income (loss) before income taxes	$	4	$	4	$	—	$	17	$	10	$	7

Table of Contents

The increase in income before income taxes for the six months ended June 30, 2022, was primarily a result of more favorable mortality experience on longevity business as compared to the same period in 2021.

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 June 30,						Six Months Ended June 30,
(dollars in millions)	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	546	$	517	$	29	$	1,125	$	1,034	$	91
Investment income, net of related expenses	55		74		(19)		112		142		(30)
Investment related gains (losses), net	(22)		2		(24)		(6)		18		(24)
Other revenues	2		5		(3)		8		7		1
Total revenues	581		598		(17)		1,239		1,201		38
Benefits and expenses:
Claims and other policy benefits	471		456		15		989		1,000		(11)
Interest credited	(8)		2		(10)		(17)		1		(18)
Policy acquisition costs and other insurance expenses	39		28		11		65		59		6
Other operating expenses	44		41		3		88		78		10
Total benefits and expenses	546		527		19		1,125		1,138		(13)
Income before income taxes	$	35	$	71	$	(36)	$	114	$	63	$	51

•The decrease in income before income taxes for the three months ended June 30, 2022, was primarily the result of decreases in net investment income and investment related gains (losses), net. The increase in income before income taxes for the six months ended June 30, 2022, as compared to the same period in 2021, was primarily due to increased net premiums, as well as improved mortality experience.

•Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency exchange fluctuations resulted in decreases in income before income taxes of $5 million and $7 million for the three and six months ended June 30, 2022, respectively, as compared to the same periods in 2021. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Table of Contents

Traditional Reinsurance


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			2022 vs 2021		2022			2021			2022 vs 2021
Revenues:
Net premiums	$	427		$	433		$	(6)	$	878		$	871		$	7
Investment income, net of related expenses	22			24			(2)		44			44			—
Investment related gains (losses), net	—			—			—		—			—			—
Other revenues	(2)			2			(4)		1			1			—
Total revenues	447			459			(12)		923			916			7
Benefits and expenses:
Claims and other policy benefits	377			414			(37)		804			883			(79)
Interest credited	—			—			—		—			—			—
Policy acquisition costs and other insurance expenses	37			27			10		62			56			6
Other operating expenses	31			30			1		61			57			4
Total benefits and expenses	445			471			(26)		927			996			(69)
Income (loss) before income taxes	$	2		$	(12)		$	14	$	(4)		$	(80)		$	76
Key metrics:
Life reinsurance in force									$756.4 billion			$861.4 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	88.3		%	95.6		%			91.6		%	101.4		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	8.7		%	6.2		%			7.1		%	6.4		%
Other operating expenses as a percentage of net premiums	7.3		%	6.9		%			6.9		%	6.5		%

The increase in income before income taxes for the three and six months ended June 30, 2022, as compared to the same periods in 2021 were primarily due to an improvement in individual life mortality experience and increased net premiums in the first six months of 2022.

Revenues

•The increases in net premiums for the three and six months ended June 30, 2022, as compared to the same periods in 2021, were 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 reinsurance in force, of $45.1 billion and $87.8 billion during the second quarter of 2022 and 2022, respectively, and $95.6 billion and $115.4 billion during the six months ended June 30, 2022 and 2021, respectively.

Benefits and expenses

•The decreases in the loss ratio for the second quarter and first six months of 2022 were due to improved mortality experience. While the cause of death is not available for all claims, the Company estimates for the six months ended June 30, 2022, that approximately $12 million of claims were primarily attributable to COVID-19.

Financial Solutions


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	119	$	84	$	35	$	247	$	163	$	84
Investment income, net of related expenses	33		50		(17)		68		98		(30)
Investment related gains (losses), net	(22)		2		(24)		(6)		18		(24)
Other revenues	4		3		1		7		6		1
Total revenues	134		139		(5)		316		285		31
Benefits and expenses:
Claims and other policy benefits	94		42		52		185		117		68
Interest credited	(8)		2		(10)		(17)		1		(18)
Policy acquisition costs and other insurance expenses	2		1		1		3		3		—
Other operating expenses	13		11		2		27		21		6
Total benefits and expenses	101		56		45		198		142		56
Income (loss) before income taxes	$	33	$	83	$	(50)	$	118	$	143	$	(25)

Table of Contents

The decreases in income before income taxes for the three and six months ended June 30, 2022, compared to the same periods in 2021, were primarily due to decreases in investment income, net of related expenses, investment related gains (losses), net and unfavorable claims experience, partially offset by increases in net premiums.

Revenues

•The increases in net premiums for the three and six months ended June 30, 2022, as compared to the same periods in 2021, were primarily due to increased volumes of closed longevity block business.

•The decreases in net investment income for the three and six months ended June 30, 2022, as compared to the same periods in 2021, were primarily related lower yield and lower income associated with unit-linked policies which fluctuate with market performance and is offset by a decrease in interest credited related to the unit-linked liabilities.

•The decreases in investment related gains (losses), net for the three and six month periods were primarily due to fluctuations in the fair market value of CPI swap derivatives due to changes in future inflation expectations and lower investment related gains on fixed-income securities, respectively.

Benefits and expenses

•The increases in claims and other policy benefits for the three and six months ended June 30, 2022, as compared to the same periods in 2021, were 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 June 30,						Six Months Ended June 30,
(dollars in millions)	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	700	$	664	$	36	$	1,393	$	1,326	$	67
Investment income, net of related expenses	89		65		24		166		126		40
Investment related gains (losses), net	(108)		15		(123)		(189)		26		(215)
Other revenues	48		13		35		68		30		38
Total revenues	729		757		(28)		1,438		1,508		(70)
Benefits and expenses:
Claims and other policy benefits	596		620		(24)		1,179		1,184		(5)
Interest credited	22		15		7		42		30		12
Policy acquisition costs and other insurance expenses	64		52		12		123		106		17
Other operating expenses	55		51		4		107		100		7
Total benefits and expenses	737		738		(1)		1,451		1,420		31
Income before income taxes	$	(8)	$	19	$	(27)	$	(13)	$	88	$	(101)

•The decreases in income before income taxes for the three and six months ended June 30, 2022, were primarily due to unfavorable fluctuations in the fair value of derivatives within the Financial Solutions business, partially offset by increases in net premiums and investment income, net.

•Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in an increase in income before income taxes of $11 million and $19 million for the three and six months ended June 30, 2022, as compared to the same periods in 2021. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.

Table of Contents

Traditional Reinsurance


	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in millions)	2022			2021			2022 vs 2021		2022			2021			2022 vs 2021
Revenues:
Net premiums	$	640		$	616		$	24	$	1,290		$	1,225		$	65
Investment income, net of related expenses	33			34			(1)		66			67			(1)
Investment related gains (losses), net	5			—			5		5			(1)			6
Other revenues	8			3			5		13			9			4
Total revenues	686			653			33		1,374			1,300			74
Benefits and expenses:
Claims and other policy benefits	537			578			(41)		1,079			1,096			(17)
Interest credited	—			—			—		—			—			—
Policy acquisition costs and other insurance expenses	42			41			1		89			84			5
Other operating expenses	49			46			3		97			91			6
Total benefits and expenses	628			665			(37)		1,265			1,271			(6)
Income (loss) before income taxes	$	58		$	(12)		$	70	$	109		$	29		$	80
Key metrics:
Life reinsurance in force									$486.1 billion			$516.1 billion
Claims and other policy benefits as a percentage of net premiums (“loss ratios”)	83.9		%	93.8		%			83.6		%	89.5		%
Policy acquisition costs and other insurance expenses as a percentage of net premiums	6.6		%	6.7		%			6.9		%	6.9		%
Other operating expenses as a percentage of net premiums	7.7		%	7.5		%			7.5		%	7.4		%

The increases in income before income taxes for the three and six months ended June 30, 2022, as compared to the same periods in 2021 were primarily the result of an increase in net premiums and favorable claims experience, partially offset by increases in expenses across the segment.

Revenues

•The increases in net premiums for the three and six months ended June 30, 2022, as compared to the same periods in 2021 were primarily due to continued business growth in the segment related to continued growth in the segment.

•The segment added new life business production, measured by face amount of reinsurance in force, of $5.7 billion and $10.9 billion during the second quarter of 2022 and 2021, respectively, and $22.3 billion and $18.5 billion during the six months ended June 30, 2022 and 2021, respectively, due to new business production.

Benefits and expenses

•The decreases in the loss ratio for the three and six months ended June 30, 2022, as compared to the same periods in 2021 were primarily due to favorable claims experience across the segment due to improved COVID-19 experience, primarily in India, and favorable claims experience, primarily in Hong Kong. While the cause of death is not yet available for all claims, the Company estimates for the six months ended June 30, 2022, that approximately $20 million of claims were attributable to COVID-19.

Financial Solutions


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	60	$	48	$	12	$	103	$	101	$	2
Investment income, net of related expenses	56		31		25		100		59		41
Investment related gains (losses), net	(113)		15		(128)		(194)		27		(221)
Other revenues	40		10		30		55		21		34
Total revenues	43		104		(61)		64		208		(144)
Benefits and expenses:
Claims and other policy benefits	59		42		17		100		88		12
Interest credited	22		15		7		42		30		12
Policy acquisition costs and other insurance expenses	22		11		11		34		22		12
Other operating expenses	6		5		1		10		9		1
Total benefits and expenses	109		73		36		186		149		37
Income (loss) before income taxes	$	(66)	$	31	$	(97)	$	(122)	$	59	$	(181)

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The decreases in income before income taxes for the second quarter and first six months of 2022 were primarily due to unfavorable fluctuations in the fair value of derivatives. The invested asset base supporting asset-intensive transactions increased to $10.7 billion as of June 30, 2022, from $6.9 billion as of June 30, 2021. The increase in the asset base compared to 2021 was primarily due to $3.7 billion from recently executed transactions and net organic growth of $1.0 billion from existing inforce blocks. The amount of reinsurance assumed from client companies, as measured by pre-tax statutory surplus, risk based capital and other financial reinsurance structures was $0.9 billion and $1.6 billion for the period ended June 30, 2022 and 2021, 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.

•The increase in net premium and claims and other policy benefits for the three months ended June 30, 2022, as compared to the same period in 2021 is attributable to the impact of recently executed asset-intensive transactions. The increase in net premiums for the six months ended June 30, 2022, as compared to 2021 is attributable to new asset-intensive business, partially offset by lower contributions from single premium asset-intensive transactions.

•The Company estimates for the six months ended June 30, 2022, that approximately $4 million of claims were attributable to COVID-19.

•The increases in investment income for the three and six months ended June 30, 2022, as compared to the same periods in 2021 were primarily due to the increase in the asset base.

•The decreases in investment related gains (losses), net for the second quarter and six months ended June 30, 2022, were primarily due to the decrease in fair value of derivatives of $(106) million and $(196) million, respectively, due to the weakening of the Japanese yen, higher interest rates and widening credit spreads.

•The increases in other revenues for the second quarter and six months ended June 30, 2022, were primarily attributable to surrender and market value adjustment charges of $21 million due to higher lapses.

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 Funding Agreement Backed Notes (“FABN”) program, 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 continues to invest in this area in an effort to both support its clients and accelerate the development of new solutions and services to increase consumer engagement within the life insurance industry and hence generate new future revenue streams.


(dollars in millions)	Three months ended June 30,						Six months ended June 30,
	2022		2021		2022 vs 2021		2022		2021		2022 vs 2021
Revenues:
Net premiums	$	—	$	—	$	—	$	—	$	—	$	—
Investment income, net of related expenses	92		48		44		145		206		(61)
Investment related gains (losses), net	(44)		64		(108)		(41)		337		(378)
Other revenues	(11)		29		(40)		(10)		39		(49)
Total revenues	37		141		(104)		94		582		(488)
Benefits and expenses:
Claims and other policy benefits	—		—		—		—		—		—
Interest credited	6		1		5		12		2		10
Policy acquisition costs and other insurance income	(24)		(26)		2		(50)		(54)		4
Other operating expenses	74		86		(12)		139		156		(17)
Interest expense	42		43		(1)		84		88		(4)
Collateral finance and securitization expense	2		2		—		3		5		(2)
Total benefits and expenses	100		106		(6)		188		197		(9)
Income (loss) before income taxes	$	(63)	$	35	$	(98)	$	(94)	$	385	$	(479)

The decreases in income before income taxes for the three and six month periods ended June 30, 2022, were primarily due to a decrease in total revenues, partially offset by a decrease in other operating expenses, attributable to the following:

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•Net investment income for the six months ended June 30, 2021, includes a one-time adjustment of $92 million of pre-tax unrealized gains on certain limited partnerships, for which the Company uses the equity method of accounting, from AOCI to net investment income. The unrealized gains should have been recognized directly in net investment income in the same prior periods they were reported as earnings by the investees. Excluding this adjustment, the increase in net investment income for the three and six month periods ended June 30, 2022, is attributable to higher investment income on Corporate invested assets due to a higher asset base and higher yield. Higher investment income includes income earned on assets associated with the Company’s FABN program, which is partially offset by interest credited related to the program.

•Investment related gains (losses), net, for the first six months of 2021 includes an adjustment to investments in limited partnerships considered to be investment companies, which should have been recognized in prior periods, of $70 million to adjust the carrying value from cost less impairments to the fair value approach, using the net asset value (“NAV”) per share or its equivalent. The remaining decrease in investment related gains (losses), net for the second quarter and first six months of 2022 as compared to the prior year is attributable to losses on sales of fixed maturity securities in the current period compared to gains in the prior period, lower unrealized gains on limited partnerships, changes in allowances and impairments on mortgage loans and available for sale securities and a decline in the fair value of equity securities. In addition, changes in the fair value of derivatives as a result of fluctuations in foreign exchange rates, interest rates and equity markets decreased investment related gains (losses), net.

•The decrease in other revenues was primarily due to a decline in the cash surrender value on corporate-owned life insurance of $7 million and $10 million for the three and six month periods ended June 30, 2022, respectively, and gains on the sales of subsidiaries in the prior period of $11 million.

•The decreases in other operating expenses for the three and six month periods ended June 30, 2022, were attributable to a decrease 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, and economic uncertainties, including interest rates and inflation, and higher than expected claims associated with COVID-19 primarily during the first quarter of 2022. The Company performs periodic liquidity stress testing to ensure its asset portfolio includes sufficient high quality liquid assets that could be utilized to bolster its liquidity position under stress scenarios. These assets could be utilized as collateral for secured borrowing transactions with various third parties or by selling the securities in the open market if needed. The Company’s liquidity requirements have been and will continue to be funded through net cash flows from operations. However, in the event of significant unanticipated cash requirements beyond normal liquidity needs, the Company has multiple liquidity alternatives available based on market conditions and the amount and timing of the liquidity need. These alternatives include the sale of invested assets subject to market conditions, borrowings under committed credit facilities, secured borrowings, and if necessary issuing long-term debt, preferred securities or common equity.

Current Market Environment

The Company’s average investment yield, excluding spread related business and variable investment income, for the six months ended June 30, 2022, was 3.88% or 6 basis points above the same period in 2021 due to the rising interest rate environment. 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 $5.3 billion at December 31, 2021, to $0.9 billion at June 30, 2022, due to increased interest rates. Similarly, gross unrealized losses increased from $0.3 billion at December 31, 2021, to $5.1 billion at June 30, 2022.

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. The Company does not rely on short-term funding or commercial paper and to date it has experienced no liquidity pressure, nor does it anticipate such pressure in the foreseeable future.

The Company projects its reserves to be sufficient, and it would not expect to write down deferred acquisition costs or be required to take any actions to augment capital, even if interest rates remain at current levels for the next five years, assuming all other factors remain constant. While interest rates have recently increased, the Company continues to feel the pressures of sustained low interest and volatile equity markets and may continue to do so; however, its underlying business is 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

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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 Company (“RGA Reinsurance”), RGA Life and Annuity Insurance Company (formerly Reinsurance Company of Missouri, Incorporated) and Rockwood Reinsurance Company (“Rockwood Re”) and dividends from operating subsidiaries. The following tables provide comparative information for RGA (dollars in millions):


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Interest and dividend income	$	44	$	32	$	152	$	64
Interest expense	42		51		83		103
Capital contributions to subsidiaries	5		3		12		7

Dividends to shareholders	49		47		98		95

Purchase of treasury stock	—		2		25		2


	June 30, 2022		December 31, 2021
Cash and invested assets	$	464	$	621

See Item 15, Schedule II – “Condensed Financial Information of the Registrant” in the 2021 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 2021 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.

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

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


	Six months ended June 30,
	2022		2021
Dividends to shareholders	$	98	$	95
Purchase of treasury stock (1)	25		—
Total amount paid to shareholders	$	123	$	95

Number of treasury shares purchased (1)	219,116		—
Average price per share	$	114.09	$	—

(1)Excludes shares utilized to execute and settle certain stock incentive awards.

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In August 2022, RGA’s board of directors declared a quarterly dividend of $0.80 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 June 30, 2022 and December 31, 2021, the Company had $3.7 billion in outstanding borrowings under its debt agreements and was in compliance with all covenants under those agreements. As of June 30, 2022 and December 31, 2021, the average net interest rate on long-term debt outstanding was 4.42%. 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.

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).

The Company may borrow up to $850 million in cash and obtain letters of credit in multiple currencies on its revolving credit facility that matures in August 2023. As of June 30, 2022, the Company had no cash borrowings outstanding and $7 million in issued, but undrawn, letters of credit under this facility.

On December 13, 2021, RGA Reinsurance issued 4.00% Surplus Notes due in 2051, with a face amount of $500 million. The net proceeds were approximately $494 million and will be used for general corporate purposes.

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 June 30, 2022, the Company maintained an $850 million syndicated revolving credit facility and certain committed letter of credit facilities aggregating to $928 million. See Note 13 – “Debt” in the Notes to Consolidated Financial Statements in the 2021 Annual Report for further information about these facilities.

The Company has obtained bank letters of credit in favor of various affiliated and unaffiliated insurance companies from which the Company assumes business. These letters of credit represent guarantees of performance under the reinsurance agreements and allow ceding companies to take statutory reserve credits. Certain of these letters of credit contain financial covenant restrictions similar to those described in the “Debt” discussion above. At June 30, 2022, there were approximately $51 million of outstanding bank letters of credit in favor of third parties. Additionally, in accordance with applicable regulations, the Company utilizes letters of credit to secure statutory reserve credits when it retrocedes business to its affiliated subsidiaries. The Company cedes business to its affiliates to help reduce the amount of regulatory capital required in certain jurisdictions, such as the U.S. and the UK. The Company believes the capital required to support the business in the affiliates reflects more realistic expectations than the original jurisdiction of the business, where capital requirements are often considered to be quite conservative. As of June 30, 2022, $1.7 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

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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” 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 $843 million as of June 30, 2022. The Company also has $582 million of funds available through collateralized borrowings from the FHLB as of June 30, 2022. As of June 30, 2022, 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 2021 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.

Summary of Primary Sources and Uses of Liquidity and Capital

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


		For the six months ended June 30,
		2022		2021
		(Dollars in millions)
Sources:
	Net cash provided by operating activities	$	242	$	2,330




	Change in cash collateral for derivative positions and other arrangements	143		184

	Net deposits from investment-type policies and contracts	2,641		79
	Issuance of preferred interests by subsidiary	90		—
	Total sources	3,116		2,593

Uses:
	Net cash used in investing activities	3,211		2,173
	Dividends to stockholders	98		95
	Repayment of collateral finance and securitization notes	29		65

	Principal payments of long-term debt	2		401

	Purchases of treasury stock	27		2


	Change in deposit asset on reinsurance	32		—

	Distributions to noncontrolling interest	1		—
	Effect of exchange rate changes on cash	108		11
	Total uses	3,508		2,747
Net change in cash and cash equivalents		$	(392)	$	(154)

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

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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.

Contractual Obligations

There were no other material changes in the Company’s contractual obligations from those reported in the 2021 Annual Report.

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 $2.8 billion and $3.0 billion at June 30, 2022 and December 31, 2021, respectively. 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 Repurchase/Reverse 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 agreements. 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 $60 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 $1.2 billion and $1.4 billion at June 30, 2022 and December 31, 2021, respectively, 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 amount of collateral exceeds the liability and is dependent on the type of assets collateralizing the guaranteed investment contracts.

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Investments

Management of Investments

The Company’s investment and derivative strategies involve matching the characteristics of its reinsurance products and other obligations. The Company seeks 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, applying security and derivative strategies within asset/liability and disciplined risk management frameworks. 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.

Portfolio Composition

The Company had total cash and invested assets of $73.5 billion and $81.5 billion as of June 30, 2022 and December 31, 2021, respectively, as illustrated below (dollars in millions):


	June 30, 2022		% of Total		December 31, 2021		% of Total
Fixed maturity securities available-for-sale	$	53,294	72.4	%	$	60,749	74.6	%
Equity securities	127		0.2		151		0.2
Mortgage loans	6,544		8.9		6,283		7.7
Policy loans	1,218		1.7		1,234		1.5
Funds withheld at interest	6,393		8.7		6,954		8.5
Short-term investments	272		0.4		87		0.1
Other invested assets	3,110		4.2		3,070		3.8
Cash and cash equivalents	2,556		3.5		2,948		3.6
Total cash and invested assets	$	73,514	100.0	%	$	81,476	100.0	%

Investment Yield

The following table presents consolidated average invested assets, at amortized cost, net investment income, investment yield, variable investment income (“VII”), and investment yield excluding VII, which can vary significantly from period to period (dollars in millions). The table excludes spread related business. Spread related business is primarily associated with contracts on which the Company earns an interest rate spread between assets and liabilities. To varying degrees, fluctuations in the yield on other spread related business is generally subject to corresponding adjustments to the interest credited on the liabilities.


	Three months ended June 30,								Six months ended June 30,
	2022			2021			Increase/ (Decrease)		2022			2021			Increase/ (Decrease)
Average invested assets at amortized cost	$	34,859		$	33,587		$	1,272	$	34,852		$	33,266		$	1,586
Net investment income	$	397		$	383		$	14	$	854		$	846		$	8
Annualized investment yield (ratio of net investment income to average invested assets at amortized cost)	4.63		%	4.64		%	(1) bp		4.96		%	5.15		%	(19) bps
VII (included in net investment income)	$	70		$	78		$	(8)	$	211		$	240		$	(29)
Annualized investment yield excluding VII (ratio of net investment income, excluding VII, to average invested assets, excluding assets with only VII, at amortized cost)	3.96		%	3.84		%	12 bps		3.88		%	3.82		%	6 bps

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Investment yield stayed relatively flat for the three months ended June 30, 2022, in comparison to the same period in the prior year. Investment yield decreased for the six months ended June 30, 2022, in comparison to the same period in the prior year, primarily due to decreased variable income from limited partnerships, which are included in other invested assets on the condensed consolidated balance sheets. Investment yield excluding variable investment income increased for the three and six months ended June 30, 2022, in comparison to the same periods in the prior year, primarily due to the rising 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 June 30, 2022 and December 31, 2021.

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 June 30, 2022 and December 31, 2021, 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 7.0% and 5.3% of the total fixed maturity securities as of June 30, 2022 and December 31, 2021, 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 64.5% and 62.8% of total fixed maturity securities as of June 30, 2022 and December 31, 2021. 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 June 30, 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, the Company’s investments in Canadian government securities represented 7.1% and 8.1%, respectively, of the fair value of total fixed maturity securities. 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.

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). If no rating is available from a rating agency or the NAIC, then an internally developed rating is used.

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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 June 30, 2022 and December 31, 2021 was as follows (dollars in millions):


		June 30, 2022						December 31, 2021
NAIC Designation	Rating Agency Designation	Amortized Cost		Estimated Fair Value		% of Total		Amortized Cost		Estimated Fair Value		% of Total
1	AAA/AA/A	$	33,989	$	31,782	59.6	%	$	33,540	$	36,725	60.5	%
2	BBB	19,851		18,011		33.8		18,684		20,379		33.5
3	BB	2,940		2,774		5.2		2,620		2,668		4.4
4	B	658		619		1.2		876		863		1.4
5	CCC and lower	124		84		0.2		96		79		0.1
6	In or near default	46		24		—		57		35		0.1
	Total	$	57,608	$	53,294	100.0	%	$	55,873	$	60,749	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 June 30, 2022 and December 31, 2021 (dollars in millions):


	June 30, 2022						December 31, 2021
	Amortized Cost		Estimated Fair Value		% of Total		Amortized Cost		Estimated Fair Value		% of Total
RMBS:
Agency	$	519	$	498	7.7	%	$	551	$	582	8.4	%
Non-agency	485		452		7.0		469		468		6.8
Total RMBS	1,004		950		14.7		1,020		1,050		15.2
ABS:
Collateralized loan obligations (“CLOs”)	1,714		1,622		25.1		1,761		1,752		25.4
ABS, excluding CLOs	2,377		2,160		33.4		2,263		2,253		32.6
Total ABS	4,091		3,782		58.5		4,024		4,005		58.0
CMBS	1,856		1,735		26.8		1,790		1,849		26.8
Total	$	6,951	$	6,467	100.0	%	$	6,834	$	6,904	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 and single-family rentals. 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 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.

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As of June 30, 2022 and December 31, 2021, the Company had $5,129 million and $349 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 an allowance for credit losses in the amount that fair value is less than the amortized cost is recorded for securities determined to have expected credit losses.

Mortgage Loans

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” 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 June 30, 2022, totaling approximately $9 million.

As of June 30, 2022 and December 31, 2021, the Company’s recorded investment in mortgage loans, gross of unamortized deferred loan origination fees and expenses and allowance for credit losses, were distributed geographically as follows (dollars in millions):


	June 30, 2022				December 31, 2021
	Recorded Investment		% of Total		Recorded Investment		% of Total
U.S. Region:
West	$	2,330	35.3	%	$	2,270	36.0	%
South	2,250		34.1		2,135		33.7
Midwest	1,158		17.6		1,166		18.4
Northeast	483		7.3		419		6.6
Subtotal - U.S.	6,221		94.3		5,990		94.7
Canada	217		3.3		193		3.0
United Kingdom	156		2.4		144		2.3
Other	—		—		2		—
Total	$	6,594	100.0	%	$	6,329	100.0	%

See “Allowance for Credit Losses and Impairments” in Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2021 Annual Report and “Mortgage Loans” in Note 4 – “Investments” in the Notes to Condensed Consolidated Financial Statements for information regarding the Company’s policy for allowance for credit losses on mortgage loans.

Allowance for Credit Losses and Impairments

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 2021 Annual Report for additional information. The table below summarizes investment related gains (losses), net related to allowances for credit losses and impairments for the three and six months ended June 30, 2022 and 2021 (dollars in millions).


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021

Change in allowance for credit losses on fixed maturity securities	$	13	$	(5)	$	24	$	(3)
Impairments on fixed maturity securities	2		—		3		—
Other impairment losses and changes in provision	—		(1)		—		(2)
Change in mortgage loan allowance for credit losses	1		(2)		3		(19)
Total	$	16	$	(8)	$	30	$	(24)

The increase in allowance for credit losses and impairments on fixed maturity securities for the three and six months ended June 30, 2022, was primarily related to high-yield securities.

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 June 30, 2022 and December 31, 2021.

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As of June 30, 2022 and December 31, 2021, the Company classified approximately 10.4% and 8.5%, 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 and asset-backed securities.

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 June 30, 2022 and December 31, 2021. Certain ceding companies maintain segregated portfolios for the benefit of the Company.

Other Invested Assets

Other invested assets include limited partnership interests, joint ventures (other than operating joint ventures), lifetime mortgages, derivative contracts, FHLB common stock and unit-linked investments. 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 June 30, 2022 and December 31, 2021.

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 June 30, 2022 and December 31, 2021.

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 $812 million and $758 million of beneficial interest in lifetime mortgages in the UK, net of allowance for credit losses as of June 30, 2022 and December 31, 2021, respectively. Investment income includes $9 million and $13 million in interest income earned on lifetime mortgages for the three months ended June 30, 2022 and 2021, respectively, and $19 million and $26 million in interest income earned on lifetime mortgages for the six months ended June 30, 2022 and 2021, 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

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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

Financial Services – Insurance

In August 2018, the FASB issued amendments that will significantly change the recognition and measurement of long-duration insurance contracts and expand disclosure requirements. The guidance is effective for the Company on January 1, 2023. The Company established a team to support the implementation of the updated guidance, which requires significant changes to policies, reporting and processes. The Company’s achievements as of the balance sheet date include, but are not limited to, the following:

•Established preliminary key accounting policies;

•Updated chart of accounts to support enhanced financial statement presentation and disclosures;

•Implemented a data management system and process for grouping treaties into cohorts;

•Established valuation analytics and reporting foundation;

•Established an assumption governance process for assumption review, changes and approvals; and

•Conducted dry runs and end to end system testing.

The Company continues to make progress on the following items (includes, but not limited to):

•Evaluating and finalizing key accounting policies;

•Evaluating the impact to the consolidated financial statements at transition;

•Determining and documenting key risks and appropriate internal controls; and

•Conducting parallel valuation runs.

See Note 13 – “New Accounting Standards” in the Notes to Condensed Consolidated Financial Statements for additional information on new accounting pronouncements and their impact, if any, on the Company’s results of operations and financial position.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of fluctuations in the value of financial instruments as a result of absolute or relative changes in interest rates, foreign currency exchange rates, equity prices or commodity prices. To varying degrees, the Company products and services, and the investment activities supporting them, generate exposure to market risk. The market risk incurred, and the Company’s strategies for managing this risk, vary by product. As of June 30, 2022, there have been no material changes in the Company’s economic exposure to market risk or the Company’s Enterprise Risk Management function from December 31, 2021, a description of which may be found in its Annual Report on Form 10-K, for the year ended December 31, 2021, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” filed with the Securities and Exchange Commission.

ITEM 4. Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective.

There was no change in the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended June 30, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is subject to litigation in the normal course of its business. The Company currently has no material litigation. A legal reserve is established when the Company is notified of an arbitration demand or litigation or is notified that an arbitration demand or litigation is imminent, it is probable that the Company will incur a loss as a result and the amount of the probable loss is reasonably capable of being estimated.

ITEM 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s 2021 Annual Report.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table summarizes RGA’s repurchase activity of its common stock during the quarter ended June 30, 2022:


	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Program
April 1, 2022 – April 30, 2022	761	$	114.19	—	$	400,000,000
May 1, 2022 – May 31, 2022	2,011	$	121.15	—	$	400,000,000
June 1, 2022 – June 30, 2022	2,168	$	125.04	—	$	400,000,000

(1)RGA had no repurchases of common stock under its share repurchase program in April, May, and June 2022. The Company net settled – issuing 2,371, 6,801 and 6,282 shares from treasury and repurchased from recipients 761, 2,011 and 2,168 shares in April, May, and June 2022, respectively, in settlement of income tax withholding requirements incurred by the recipients of equity incentive awards.

ITEM 6. Exhibits

See index to exhibits.

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INDEX TO EXHIBITS



Exhibit Number						Description

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

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

10.1						Second Amendment to Letter Agreement of Credit Reimbursement Agreement, dated May 13, 2022, by and between Reinsurance Group of America, Incorporated and Credit Agricole Corporate and Investment Bank, Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 16, 2022.

31.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

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

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Reinsurance Group of America, Incorporated
Date: August 5, 2022	By:	/s/ Anna Manning
		Anna Manning
		President & Chief Executive Officer
		(Principal Executive Officer)
Date: August 5, 2022	By:	/s/ Todd C. Larson
		Todd C. Larson
		Senior Executive Vice President & Chief Financial Officer
		(Principal Financial and Accounting Officer)