REINSURANCE GROUP OF AMERICA INC
For the period ended Dec 31, 2024. Filed Feb 21, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 21, 2025
RGA$261.90-0.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-26.
0000898174-24-000048
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCautionary Note Regarding Forward-Looking StatementsOverviewIndustry TrendsCritical Accounting EstimatesConsolidated Results of OperationsResults of Operations by SegmentCanada OperationsEurope, Middle East and Africa OperationsAsia Pacific OperationsCorporate and OtherLiquidity and Capital ResourcesCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-21.
0000898174-25-000027
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCautionary Note Regarding Forward-Looking StatementsOverviewIndustry TrendsCritical Accounting EstimatesConsolidated Results of OperationsResults of Operations by SegmentCanada OperationsEurope, Middle East and Africa OperationsAsia Pacific OperationsCorporate and OtherLiquidity and Capital ResourcesThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 433 previous paragraphs and 467 current paragraphs.
248 unchanged; 114 reworded; 97 added; 64 removed; 7 previous and 8 current paragraphs rearranged.
Tables are not compared: 38 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (97)
Current report
Consolidated income before income taxes
Current report
The decrease in income during 2024 was primarily the result of the following:
Current report
•During the third quarter of 2024, the Company completed its annual assumptions review resulting in a remeasurement loss, primarily driven by updated lapse assumptions in India, partially offset by favorable mortality updates in the U.S. and Canada. The 2023 annual assumptions update resulted in an immaterial gain million in the third quarter of 2023. See “Consolidated Adjusted Operating Income Before Taxes” and Note 5 – “Future Policy Benefits” for additional information.
Current report
•During the third quarter of 2024, the Company made a decision to increase its per life retention limit from $8 million to $30 million. As a result, the Company expects to recapture business previously retroceded starting in 2025. The increased retention limit and updated recapture assumption resulted in a future policy benefits remeasurement loss recognized in the third quarter of 2024. See “Consolidated Adjusted Operating Income Before Taxes” and Note 10 – “Reinsurance” for additional information.
Current report
•Non-economic loss recognized at the inception of a single premium pension risk transfer (“PRT”) transaction completed during 2024. The non-economic loss at inception is the difference between the single premium received and the valuation of the initial reserve based on interest rates prescribed by U.S. GAAP.
Current report
•An increase in investment related losses resulting from portfolio repositioning partially offset by changes in the fair value of embedded derivatives associated with modco/funds withheld treaties.
Current report
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations increased income before income taxes by $16 million due to the weakening of the Japanese yen and Korean won on losses incurred in Japan and Korea, and the strengthening of the British pound compared to the U.S. Dollar. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Current report
•During 2024 and 2023, the Company repositioned its investment portfolio to generate higher yields which led to net capital losses of $617 million and $203 million, respectively.
Current report
The increase in investment related losses, net was partially offset by the following:
Current report
Non-economic changes in insurance liabilities
Current report
Non-economic changes in insurance liabilities include the initial loss on PRT transactions, net of amortization, and changes in the fair value of embedded derivatives associated with the Company’s reinsurance of EIAs. The initial loss at inception of a PRT transaction is the difference between the single premium received and the valuation of the initial reserve based on interest rates prescribed by U.S. GAAP. During 2024 and 2023, the Company incurred non-economic losses of $127 million and $36 million, respectively.
Current report
•The annual assumptions review had less of an impact in 2023 compared to 2022. See “Consolidated Adjusted Operating Income Before Taxes” and Note 5 – “Future Policy Benefits” in the Notes to Consolidated Financial Statements for additional information.
Current report
Consolidated adjusted operating income before income taxes
Current report
Non-GAAP Measure – Adjusted operating income before income taxes is not determined in accordance with U.S. GAAP. The Company principally uses adjusted operating income before income taxes in evaluating performance because the Company believes that such measure, when reviewed in conjunction with relevant U.S. GAAP measure (i.e., income before income taxes), presents a clearer picture of its operating performance and is used by the Company in the allocation of its resources. The Company believes that this non-GAAP financial measure provides investors and other third parties with a better understanding of the Company’s results of operations, financial statements and the underlying profitability drivers and trends of the Company’s businesses by excluding specified items which may not be indicative of the Company’s ongoing operating performance and may fluctuate significantly from period to period. These measures should be considered supplementary to the Company’s financial results that are presented in accordance with U.S. GAAP and should not be viewed as a substitute for U.S. GAAP measures. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way the Company calculates such measures. Consequently, the Company’s non-GAAP financial measures may not be comparable to similar measures used by other companies.
Current report
Adjusted operating income (loss) before taxes is calculated as income (loss) before income taxes excluding, as applicable:
Current report
•Substantially all of the effect of net investment related gains and losses;
Current report
•Changes in the fair value of contracts that provide market risk benefits;
Current report
•Non-economic losses at contract inception for direct pension risk transfer single premium business (which are amortized into adjusted operating income within claims and other policy benefits over the estimated lives of the contracts);
Current report
•Any net gain or loss from discontinued operations;
Current report
•The cumulative effect of any accounting changes;
Current report
•The impact of certain tax related items; and
Current report
•Any other items the Company believes are not indicative of the Company’s ongoing operations.
Current report
See “Segment Accounting Policies” within Note 19 – “Segment Information” in the Notes to Consolidated Financial Statements for additional information regarding the presentation of segment results and the Company’s definition of adjusted operating income.
Current report
Reconciliation of income before taxes to adjusted operating income (loss) before taxes
Current report
The reconciliation of income (loss) before income taxes to adjusted operating income before income taxes is shown below for the periods presented (dollars in millions):
Current report
The increase in adjusted operating income before income taxes in 2024 was primarily the result of the following:
Current report
•An increase in premiums due to new business growth and management in force actions during 2024.
Current report
•An increase in other income primarily attributable to higher surrender charges related to an increase in lapses on a single premium block of business
Current report
The increases in adjusted operating income were partially offset by the following:
Current report
•During the third quarter of 2024, the Company completed its annual assumptions review resulting in a loss of $58 million, primarily driven by updated lapse assumptions in India, partially offset by favorable mortality updates in the U.S. and Canada. The 2023 annual assumptions update resulted in a gain of $3 million in the third quarter of 2023. See Note 5 – “Future Policy Benefits” for additional information.
Current report
•During the third quarter of 2024, the Company made a decision to increase its per life retention limit from $8 million to $30 million. The current per life retention limit has been effective since 2008. Since then, the Company has grown significantly and further diversified its business, thus increasing the ability to absorb earnings volatility related to claims. Additionally, the recently adopted LDTI accounting standard further reduces earnings volatility related to claims. These factors led to the decision to increase the per life retention limit effective January 1, 2025. As a result, the Company expects to recapture business previously retroceded starting in 2025. The increased retention limit and updated recapture assumption resulted in a future policy benefits remeasurement loss of $136 million recognized in the third quarter of 2024. The higher per life retention limit is expected to increase profits in the future. See Note 10 – “Reinsurance” for additional information.
Current report
•An increase in other operating expenses due to higher compensation costs related to incentive compensation accruals and an increase in consulting costs related to an expansion of information technology projects.
Current report
See “Results of Operations by Segment” for additional discussion of current and prior period results of operations.
Current report
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations increased adjusted operating income before income taxes by $5 million primarily due to the strengthening of the British pound and weakening of the Korean won on losses incurred in Korea compared to the U.S. Dollar. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Current report
•The average yield earned on investments, excluding spread related business, was 4.82% and 4.68% in 2024 and 2023, respectively. The increase in yield for the year ended December 31, 2024, compared to the prior year was attributable to higher new money rates, an increase investments in higher yielding alternative and private asset classes.
Showing the first 40 of 97 passages. Open the source sections for the rest.
Removed paragraphs (64)
Previous report
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations decreased income before taxes by $15 million due to the weakening of certain foreign currencies compared to the U.S. Dollar, primarily, the Canadian Dollar and the Japanese Yen. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Previous report
Net investment income and investment related gains and losses
Previous report
•The average yield earned on investments, excluding spread related business, was 4.68% and 4.69% in 2023 and 2022, respectively. Investment yield remained relatively consistent the prior year, primarily due to decreased variable income from limited partnerships and real estate joint ventures, offset by the increase in risk-free interest rates.
Previous report
•Changes in the fair value of derivative instruments, excluding embedded derivatives, included in investment related gains (losses), net. For the year ended December 31, 2022, the fair value of these instruments decreased by $301 million, compared to an increase of $90 million in 2022.
Previous report
•$204 million, pre-tax, of net realized losses, included in investment related gains (losses), net associated with portfolio repositioning and higher interest rates compared to $234 million of net realized gains recognized in the prior year.
Previous report
•The investment related losses were offset by a decrease in mortality claims as a result of lower COVID-19 claims and favorable non-COVID-19 experience in 2022.
Previous report
Impact of certain derivatives and market risk benefits
Previous report
The Company recognizes in consolidated income any changes in the fair value of embedded derivatives on modco or funds withheld treaties and equity index annuities (“EIAs”). In addition, the Company recognizes the changes in fair value of market risk benefits associated with guaranteed minimum benefit riders in market risk benefits remeasurement gains (losses). The Company utilizes freestanding derivatives to minimize the income statement volatility due to changes in the fair value of market risk benefits associated with guaranteed minimum benefit riders. The following table presents the effect of embedded derivatives, market risk benefits and related freestanding derivatives on income before income taxes for the periods indicated (dollars in millions):
Previous report
The following table summarizes income before income taxes for the Company’s U.S. and Latin America operations for the periods presented:
Previous report
The decrease in income before income taxes in 2022 was primarily driven by higher investment related losses and a decrease in the fair value of the embedded derivatives associated with modco/funds withheld treaties within Financial Solutions and unfavorable impacts from assumption updates in the U.S. Traditional lines of business, partially offset by favorable claims experience in 2022 as compared to 2021.
Previous report
•The increase in net premiums was primarily due to organic growth on existing treaties as well as new business. The segment added new life business production, measured by face amount of reinsurance in force, of $154.3 billion and $145.9 billion during 2023 and 2022, respectively. Also contributing to the increase in net premiums was the recapture of a retrocession treaty, effective April 1, 2023, which resulted in a reduction in ceded premium in the current year.
Previous report
•The decrease in future policy benefits remeasurement losses in 2023 was attributable to a remeasurement loss in the amount of $17 million as a result of updating the assumptions used to measure the liability for future policy benefits compared to a remeasurement loss of $170 million in 2022 from assumption updates, and favorable claims experience relative to the prior year. The favorable claims experience was primarily in the U.S. Individual Life business and, in large part, related to reduced COVID-19 claims in 2023.
Previous report
The increase in income before income taxes in 2022 for the U.S. and Latin America Traditional segment was primarily due to organic growth on existing treaties as well as new business and favorable claims experience in 2022 relative to period year, primarily in the U.S. Individual Life business in large part, related to COVID-19 claims, partially offset by unfavorable impacts from assumption updates in 2022 as compared to 2021.
Previous report
The increase in income before income taxes in 2023 for the U.S. and Latin America Financial Solutions segment was primarily due to the change in the fair value of embedded derivatives and market risk benefits remeasurement gains (losses), net of the change in the fair value of the associated free standing derivatives, and higher net investment income due to increases in interest rates in Asset-Intensive, partially offset by a decrease in Capital Solutions associated with a recapture fee earned on a terminated transaction in 2022.
Previous report
The decrease in income before income taxes for the U.S. and Latin America Capital Solutions line of business was primarily due to a non-recurring recapture fee earned on a terminated transaction in 2022. Fees earned from this business can vary significantly depending on the size of the transaction and the timing of their completion and therefore can fluctuate from period to period.
Previous report
Impact of certain derivatives and market risk benefits
Previous report
The Company recognizes in consolidated income any changes in the fair value of embedded derivatives on modco or funds withheld treaties and equity indexed annuities (“EIAs”). In addition, the Company recognizes the changes in fair value of market risk benefits associated with guaranteed minimum benefit riders. The Company utilizes freestanding derivatives to minimize the income statement volatility due to changes in the fair value of market risk benefits associated with guaranteed minimum benefit riders.
Previous report
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, embedded derivatives associated with the Company’s reinsurance of EIAs and changes in the fair value of market risk benefits associated 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 and equity market performance, all of which are factors in the calculations of fair value of assets and liabilities.
Previous report
The following table summarizes the asset-intensive results and quantifies the impact of these embedded derivatives and market risk benefits 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.
Previous report
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 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 years ended December 31, 2023 and 2022.
Previous report
The change in fair value of the embedded derivatives related to modco/funds withheld treaties decreased income before income taxes by $167 million in 2023, which was primarily driven by the impact of lower risk-free interest rates on funds withheld liability balances. The decrease in fair value in 2022 was primarily driven by the impact of higher risk-free interest rates and widening credit spreads on funds withheld receivable balances.
Previous report
Equity-Indexed Annuities– Represents changes in the liability for equity-indexed annuities in excess of changes in account value. The change in fair value of embedded derivative liabilities associated with equity-indexed annuities increased income before income taxes by $6 million in 2023 and $53 million in 2022, primarily due to an increase in interest rates which had the impact of lowering the fair value of the liability.
Previous report
Discussion and analysis before certain derivatives and market risk benefits
Previous report
The changes in derivatives and market risk benefits 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), 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 market risk benefits as the primary factors that drive profitability of the underlying treaties are investment income, fee income (included in other revenues) and interest credited.
Previous report
•Income before income taxes and certain derivatives and market risk benefits increased by $49 million in 2023, primarily due to higher investment income and higher investment related gains (losses), net in coinsurance and funds withheld portfolios due to increases in interest rates.
Previous report
•Revenue before certain derivatives and market risk benefits increased by $1,568 million in 2023, primarily due to PRT single premiums and higher investment income due to an increase in interest rates. PRT premiums are offset by a corresponding increase in future policy benefits.
Previous report
•Benefits and expenses before certain derivatives and market risk benefits increased by $1,519 million in 2023, primarily due to the establishment of liabilities for future policy benefits associated with PRT transactions, which was offset by a corresponding increase in premiums, for a net loss impact of $42 million related to the 2023 PRT transaction.
Previous report
The decrease in income before income taxes in 2022 for the U.S. and Latin America Financial Solutions segment was primarily due to lower investment related gains (losses), net primarily due to a decrease in the fair value of embedded derivatives related to modco/funds withheld treaties and higher net investment related losses in coinsurance portfolios, partially offset by a recapture fee earned on a termination transaction on Capital Solutions business in 2022.
Previous report
The increase in income before income taxes in 2022 was primarily due to future policy remeasurement gains as compared to future policy benefits remeasurement losses in 2021, partially offset by a decrease in investment income and unfavorable claims experience in the individual mortality and group lines of business.
Previous report
•The decrease in premiums was the result of foreign currency fluctuations. Excluding the impact of foreign currency fluctuations, the increase in net premiums was primarily due to organic growth.
Previous report
•The segment added new life business production, measured by face amount of reinsurance in force, of $44.1 billion and $48.2 billion during 2023 and 2022, respectively.
Previous report
•The decrease in policy acquisition costs was primarily due to lower allowances and ceded expenses.
Previous report
The decrease in income before income taxes in 2022 was primarily due to unfavorable claims experience in the individual mortality and group lines of business and lower investment income.
Previous report
The increase in income before income taxes in 2022 was primarily the result of future policy benefits remeasurement gains recognized in 2022 as compared to future policy benefits remeasurements losses recognized in 2021.
Previous report
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations resulted in a $2 million increase in income before income taxes in 2023. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Previous report
The increase in income before income taxes in 2022 was the result of increased net premiums, partially offset by decreases in net investment income and investment related gains (losses), net.
Previous report
The decrease in income before income taxes in 2023 was primarily due to future policy benefits remeasurement losses as compared to future policy benefits remeasurement gains in 2022 and unfavorable claims experience, partially offset by an increase in net premiums.
Previous report
The increase in income before income taxes in 2022 was the result of an improvement in individual life mortality experience and future policy remeasurement gains as compared to future policy remeasurement losses in 2022.
Showing the first 40 of 64 passages. Open the source sections for the rest.
Reworded paragraphs (114)
Previous wording
The Company is among the leading global providers of life reinsurance and financial solutions, with $3.7 trillion of life reinsurance in force and assets of $97.6 billion as of December 31, 2023. 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.
Current wording
The Company is among the leading global providers of life reinsurance and financial solutions, with $3.9 trillion of life reinsurance in force and assets of $118.7 billion as of December 31, 2024. Traditional reinsurance includes individual and group life and health, disability, and critical illness reinsurance. Financial solutions includes longevity reinsurance, asset-intensive reinsurance, pension risk transfer, 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.
Previous wording
The following table sets forth the Company’s premiums attributable to each of its segments for the periods indicated on both a gross assumed basis and net of premiums ceded to third parties:
Current wording
The following table sets forth the Company’s premiums attributable to each of its segments for the periods presented on both a gross assumed basis and net of premiums ceded to third parties:
Previous wording
The following table sets forth selected information concerning assumed life reinsurance business in force and assumed new business volume by segment for the periods indicated. The terms “in force” and “new business” refer to insurance policy face amounts or net amounts at risk.
Current wording
The following table sets forth selected information concerning assumed life reinsurance business in force and assumed new business volume by segment for the periods presented. The terms “in force” and “new business” refer to insurance policy face amounts or net amounts at risk.
Previous wording
Reinsurance business in force reflects the addition or acquisition of new life reinsurance business, offset by terminations (e.g., life and group contract terminations, lapses of underlying policies, deaths of insureds, and recapture), changes in foreign currency exchange and any other changes in the amount of insurance in force. As a result of terminations, fluctuations in foreign exchange rates and other changes, assumed in force amounts at risk decreased by $59.7 billion, $475.2 billion and $425.8 billion in 2023, 2022 and 2021, respectively.
Current wording
Reinsurance business in force reflects the addition or acquisition of new life reinsurance business, offset by terminations (e.g., life and group contract terminations, lapses of underlying policies, deaths of insureds and recaptures), changes in foreign currency exchange and any other changes in the amount of insurance in force. As a result of terminations, fluctuations in foreign exchange rates and other changes, assumed in force amounts at risk decreased by $330.8 billion, $59.7 billion and $475.2 billion in 2024, 2023 and 2022, respectively.
Previous wording
The Company’s accounting policies are described in Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial Statements. The Company believes its most critical accounting estimates include the establishment of premiums receivable; the establishment of liabilities for future policy benefits and incurred but not reported claims; the valuation of investments and investment allowance for credit losses and impairments; the valuation of market risk benefits and embedded derivatives; and accounting for income taxes. The balances of these accounts require extensive use of assumptions and estimates, particularly related to the future performance of the underlying business.
Current wording
The Company’s accounting policies are described in Note 2 – “Significant Accounting Policies and Pronouncements” in the Notes to Consolidated Financial Statements. The Company believes its most critical accounting estimates include the establishment of premiums receivable; the establishment of liabilities for future policy benefits and incurred but not reported claims; the valuation of investments, investment allowance for credit losses and investment impairments; the valuation of market risk benefits and embedded derivatives; and accounting for income taxes. The balances of these accounts require extensive use of assumptions and estimates, particularly related to the future performance of the underlying business.
Previous wording
Given the unique risks and highly customized nature the Company’s financial reinsurance business, insurance and reinsurance contracts for the Financial Solutions business are not aggregated with other contracts for the purpose of calculating the liability for future policy benefits.
Current wording
Given the unique risks and highly customized nature of the Company’s financial reinsurance business, insurance and reinsurance contracts for the Financial Solutions business are not aggregated with other contracts for the purpose of calculating the liability for future policy benefits.
Previous wording
The Company reinsures certain annuity products that contain terms that are deemed to be market risk benefits or embedded derivatives, primarily variable annuities with guaranteed minimum benefits and equity-indexed annuities.
Current wording
The Company reinsures certain insurance products that contain terms that are deemed to be market risk benefits or embedded derivatives.
Previous wording
Variable annuities with guaranteed minimum benefits have been identified as market risk benefits. Market risk benefits are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. Market risk benefits are measured at fair value using an option-based valuation model based on current net amounts at risk, market data, Company experience, and other factors. Changes in fair value are recognized in net income each period with the exception of the portion of the change in fair value due to a change in the liability’s credit valuation adjustment (“CVA”), which is recognized in other comprehensive income (loss). The liability for market risk benefits totaled $258 million and $247 million as of December 31, 2023 and 2022, respectively.
Current wording
Variable annuities with guaranteed minimum benefits have been identified as market risk benefits. Market risk benefits are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. Market risk benefits are measured at fair value using an option-based valuation model based on current net amounts at risk, market data, Company experience and other factors. Changes in fair value are recognized in net income each period with the exception of the portion of the change in fair value due to a change in the liability’s credit valuation adjustment (“CVA”), which is recognized in other comprehensive income (loss). The liability for market risk benefits totaled $223 million and $258 million as of December 31, 2024 and 2023, respectively.
Previous wording
The Company reinsures certain annuity products that contain terms that are deemed to be embedded derivatives, primarily equity-indexed annuities. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated under the general accounting principles for Derivatives and Hedging. If the instrument would not be reported in its entirety at fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheets at fair value with the host contract.
Current wording
The Company reinsures certain insurance products that contain terms that are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated under the general accounting principles for Derivatives and Hedging. If the instrument would not be reported in its entirety at fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheets at fair value with the host contract.
Previous wording
Additionally, reinsurance treaties written on a modified coinsurance or funds withheld basis are subject to the general accounting principles for Derivatives and Hedging related to embedded derivatives. The majority of the Company’s funds withheld at interest balances are associated with its reinsurance of annuity contracts, the majority of which are subject to the general accounting principles for Derivatives and Hedging related to embedded derivatives.
Current wording
Additionally, reinsurance treaties written on a modified coinsurance or funds withheld basis are subject to the general accounting principles for Derivatives and Hedging related to embedded derivatives. The majority of the Company’s funds withheld at interest balances are associated with its reinsurance of annuity contracts.
Previous wording
The valuation of the various embedded derivatives requires complex calculations based on actuarial and capital markets inputs and assumptions related to estimates of future cash flows and interpretations of the primary accounting guidance continue to evolve in practice. The valuation of embedded derivatives is sensitive to the investment credit spread environment. Changes in investment credit spreads are also affected by the application of a credit valuation adjustment (“CVA”). The fair value calculation of an embedded derivative in an asset position utilizes a CVA based on the ceding company’s credit risk. Conversely, the fair value calculation of an embedded derivative in a liability position utilizes a CVA based on the Company’s credit risk. Generally, an increase in investment credit spreads, ignoring changes in the CVA, will have a negative impact on the fair value of the embedded derivative (decrease in income).
Current wording
The valuation of the various embedded derivatives requires complex calculations based on actuarial and capital markets inputs and assumptions related to estimates of future cash flows and interpretations of the primary accounting guidance continue to evolve in practice. The valuation of embedded derivatives is sensitive to the investment credit spread environment. Changes in investment credit spreads are also affected by the application of a CVA. The fair value calculation of an embedded derivative in an asset position utilizes a CVA based on the ceding company’s retrocessionaire’s credit risk. Conversely, the fair value calculation of an embedded derivative in a liability position utilizes a CVA based on the Company’s credit risk. Generally, an increase in investment credit spreads, ignoring changes in the CVA, will have a negative impact on the fair value of the embedded derivative (decrease in income).
Previous wording
Fixed maturity securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on fixed maturity securities classified as available-for-sale, less applicable deferred income taxes as well as related adjustments to deferred acquisition costs, if applicable, are reflected as a direct charge or credit to accumulated other comprehensive income (loss) (“AOCI”) in stockholders’ equity on the consolidated balance sheets.
Current wording
Fixed maturity securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on fixed maturity securities classified as available-for-sale, less applicable deferred income taxes, are recognized in other comprehensive income.
Previous wording
The interest rate sensitivity relating to the Company’s fixed maturity securities is assessed using hypothetical scenarios that assume positive and negative 50 and 100 basis point parallel shifts in the yield curves. This analysis assumes that the U.S., Canada and other pertinent countries’ yield curve shifts are of equal direction and magnitude. Change in value of individual securities is estimated consistently under each scenario using a commercial valuation tool. The Company’s actual experience may differ from the results noted below particularly due to assumptions utilized or if events differ from those included in the methodology. The following tables summarize the results of this analysis for fixed maturity securities in the Company’s investment portfolio as of December 31, 2023 (dollars in millions):
Current wording
The interest rate sensitivity relating to the Company’s fixed maturity securities is assessed using hypothetical scenarios that assume positive and negative 50 and 100 basis point parallel shifts in the yield curves. This analysis assumes that the U.S., Canada and other pertinent countries’ yield curve shifts are of equal direction and magnitude. Change in value of individual securities is estimated consistently under each scenario using a commercial valuation tool. The Company’s actual experience may differ from the results noted below particularly due to assumptions utilized or if events differ from those included in the methodology. The following table summarizes the results of this analysis for fixed maturity securities in the Company’s investment portfolio as of December 31, 2024 (dollars in millions):
Previous wording
Interest rate sensitivity analysis is also used to measure the Company’s interest rate risk related to floating rate securities by computing estimated changes in pretax income for floating rate assets and liabilities over a one year period following an instantaneous, parallel, hypothetical 50 basis point change in market interest rates. The Company’s projected decrease in pretax income associated with floating rate instruments in the event of an instantaneous 50 basis point decrease in market interest rates for its fiscal year ended December 31, 2023, was $28 million.
Current wording
Interest rate sensitivity analysis is also used to measure the Company’s interest rate risk related to floating rate securities by computing estimated changes in pretax income for floating rate assets and liabilities over a one year period following an instantaneous, parallel, hypothetical 100 basis point change in market interest rates. The Company’s projected decrease in pretax income associated with floating rate instruments in the event of an instantaneous 100 basis point decrease in market interest rates for its fiscal year ended December 31, 2024, was $40 million.
Previous wording
Discussions regarding our financial condition and results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022, and the year ended December 31, 2022, compared to the year ended December 31, 2021, are presented below.
Current wording
A discussion regarding our financial condition and results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023, and the year ended December 31, 2023, compared to the year ended December 31, 2022, are presented below.
Previous wording
The following table summarizes the changes in net income for the periods presented.
Current wording
The following table summarizes the changes in net income for the periods presented (dollars in millions, except per share data):
Previous wording
The decrease in investment related gains (losses), net is attributable to the following:
Current wording
The increase in investment related losses, net is attributable to the following:
Previous wording
•Changes in the fair value of free standing derivatives decreased investment related gains (losses), net by $129 million in 2023, compared to $166 million in 2022.
Current wording
•Changes in the fair value of free standing derivatives increased investment related losses, net by $229 million in 2024, compared to $129 million in 2023.
Previous wording
•The Company incurred $61 million and $39 million of impairments and change in allowance for credit loss during the years ended December 31, 2023 and 2022, respectively.
Current wording
•The Company incurred $76 million and $61 million of impairments and change in allowance for credit losses during the years ended December 31, 2024 and 2023, respectively.
Previous wording
•Changes in the fair value of embedded derivatives associated with modco/funds withheld treaties, decreased investment related gains (losses) by $163 million in 2023, compared to $173 million in 2022.
Current wording
•Changes in the fair value of embedded derivatives associated with modco/funds withheld treaties, decreased investment related losses, net by $116 million in 2024, compared to an increase in investment related losses, net of $163 million in 2023.
Previous wording
Market Risk Benefits– Represents the impact related to market risk benefits, which consist of guaranteed minimum benefits associated with the Company’s reinsurance of certain annuity products including the associated free standing derivatives (interest rate swaps, financial futures and equity options), purchased by the Company to economically hedge the market risk benefit. The change in fair value of the market risk benefits, net of the changes in the associated free standing derivatives, decreased income before income taxes by $40 million in 2023. The decrease in income for 2023 was primarily due to increasing interest rates. The decrease in income for 2022 was attributable to a change in the benchmark rate to the secured overnight financing rate and increasing interest rates.
Current wording
Represents the impact related to market risk benefits, which consist of guaranteed minimum benefits associated with the Company’s reinsurance of variable and equity-indexed annuities. The fair value changes of market risk benefits along with the changes in fair value of the freestanding derivatives (interest rate swaps, financial futures and equity options) purchased by the Company to substantially hedge the liability are reflected in revenues. The change in fair value of market risk benefits for guaranteed minimum benefits, after allowing for changes in the associated freestanding derivatives, decreased income before income taxes, by $21 million and $40 million in 2023.
Previous wording
The effective tax rate on a consolidated basis was 21.8% and 27.3% for 2023 and 2022, respectively. The effective tax rate for 2023 was greater than the U.S. Statutory rate of 21.0% primarily due to income earned in jurisdictions with tax rates higher than the U.S. and changes to the valuation allowance which were partially offset with benefits from foreign tax credits and return to provision adjustments. The Company continues to record a valuation allowance on certain deferred taxes related to unrealized losses on the Company’s fixed maturity portfolio and considered the need for a valuation allowance on the remaining deferred tax asset associated with the fixed maturity securities. However, based on the ability to carryback and carryforward tax capital losses and the Company’s ability and intention to hold available for sale fixed maturity securities showing an unrealized loss until recovery, as described in Note 11 – “Investments” the Company determined it is more likely than not to realize the remaining deferred tax asset. See Note 14 – “Income Tax” in the Notes to Consolidated Financial Statements for additional information.
Current wording
The effective tax rate on a consolidated basis was 26.3% and 21.8% for 2024 and 2023, respectively. The effective tax rate for 2024 was greater than the U.S. Statutory rate of 21.0% primarily due to income in non-U.S. jurisdictions and tax expense on legal entity restructuring which were partially offset with benefits due to the release of valuation allowances in non-U.S. jurisdictions and benefits related to return to provision adjustments. See Note 14 – “Income Tax” in the Notes to Consolidated Financial Statements for additional information.
Previous wording
The decrease in income in 2022 compared to 2021 was primarily the result of the following:
Current wording
The increase in income in 2023 compared to 2022 was primarily the result of the following:
Previous wording
The increase in premiums was primarily due to single premium pension risk transfer (“PRT”) transactions completed during the year during 2023. The PRT single premiums received were offset by an increase in reserves. The remaining increase in premiums is primarily due to organic growth on existing treaties and new business production, measured by the face amount of reinsurance in force, of $363.0 billion during 2023 compared to $408.9 billion during 2022. Consolidated assumed life reinsurance in force increased to $3,704.1 billion as of December 31, 2023, from $3,400.7 billion as of December 31, 2022, due to new business production and changes in foreign exchange rates.
Current wording
The increase in premiums was primarily due to single premium pension risk transfer (“PRT”) transactions completed during 2024. The PRT single premiums received were offset by an increase in reserves. The remaining increase in premiums is primarily due to organic growth on existing treaties and new business production, measured by the face amount of reinsurance in force, of $505.4 billion during 2024 compared to $363.0 billion during 2023. Consolidated assumed life reinsurance in force increased to $3,878.7 billion as of December 31, 2024, from $3,704.1 billion as of December 31, 2023, due to new business production and changes in foreign exchange rates.
Previous wording
The increase in net investment income is primarily attributable to an increase in the average invested asset base and higher risk-free rates earned on new investments, partially offset by a decrease in variable investment income associated with joint venture and limited partnership investments:
Current wording
The increase in net investment income is primarily attributable to an increase in the average invested asset base and higher risk-free rates earned on new investments and higher yields earned on alternative and private asset classes, partially offset by a decrease in variable investment income associated with joint venture and limited partnership investments:
Previous wording
•The average invested assets at amortized cost, excluding spread related business, totaled $35.9 billion and $34.4 billion in 2023 and 2022, respectively.
Current wording
•The average invested assets at amortized cost, excluding spread related business, totaled $38.5 billion and $35.9 billion in 2024 and 2023, respectively.
Previous wording
•During 2023, the Company updated its assumptions which resulted in a future policy benefits remeasurement gain of $3 million compared to a future policy benefits remeasurement loss of $242 million in 2022. See Note 5 – “Future Policy Benefits” for additional information.
Current wording
•During 2023, the Company updated its assumptions which resulted in a future policy benefits remeasurement gain of $3 million compared to a future policy benefits remeasurement loss of $242 million in 2022. See Note 5 – “Future Policy Benefits” in the Notes to Consolidated Financial Statements for additional information.
Previous wording
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, corporate-owned life insurance policies, pension risk transfer (“PRT”) group annuity contracts 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 consolidated statements of income.
Current wording
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, universal life products 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, corporate-owned life insurance policies, pension risk transfer (“PRT”) group annuity contracts 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 consolidated statements of income.
Previous wording
The increase in income before income taxes in 2023 was primarily the result of a decrease in remeasurement losses due to assumption updates and favorable claims experience in 2023 as compared to the prior year in U.S. Traditional lines of business, partially offset by a recapture fee earned on a terminated Capital Solutions transaction in 2022.
Current wording
The increase in adjusted operating income before income taxes in 2023 was primarily the result of a decrease in remeasurement losses due to assumption updates and favorable claims experience in 2023 as compared to the prior year in U.S. Traditional lines of business, partially offset by a recapture fee earned on a terminated Capital Solutions transaction in 2022.
Previous wording
(1) Includes Claims and other policy benefits and Future policy benefits remeasurements (gains) losses
Current wording
(1)Includes claims and other policy benefits and future policy benefits remeasurements (gains) losses.
Previous wording
•The decrease in policy acquisition costs and other insurance expenses as a percentage of net premiums was less than 1% and primarily due to varying allowance levels within coinsurance type arrangements and the mix of new business between coinsurance versus yearly renewable term.
Current wording
•The increase in policy acquisition costs and other insurance expenses as a percentage of net premiums was less than 1% and primarily due to varying allowance levels within coinsurance type arrangements and the mix of new business between coinsurance versus yearly renewable term.
Previous wording
The increase in income before income taxes in 2023 for the U.S. and Latin America Traditional segment was primarily due to organic growth on existing treaties as well as new business treaties, a decrease in remeasurement losses due to assumption updates in 2023 as compared to the prior year and improved claims experience across all lines of business in 2023, driven in large part by a significant reduction in COVID-19 claims compared to 2022, partially offset by lower variable investment income in the current period.
Current wording
•The increase in adjusted operating income before income taxes in 2023 for the U.S. and Latin America Traditional segment was primarily due to organic growth on existing treaties as well as contributions from new transactions, a decrease in remeasurement losses due to assumption updates in 2023 as compared to the prior year and improved claims experience across all lines of business in 2023, driven in large part by a significant reduction in COVID-19 claims compared to 2022, partially offset by lower variable investment income in the current period.
Previous wording
The increase in premiums was primarily due to single premium pension risk transfer (“PRT”) transactions completed in 2023, which are offset by an associated increase in reserves.
Current wording
•The increase in premiums was primarily due to several single premium pension risk transfer (“PRT”) transactions completed in 2024, which were offset by an associated increase in reserves reflected in adjusted claims and other policy benefits.
Previous wording
The book value of the invested asset base supporting asset-intensive transactions decreased to $20.9 billion as of December 31, 2023, from $23.8 billion as of December 31, 2022.
Current wording
•The book value of the invested asset base supporting asset-intensive transactions increased to $22.0 billion as of December 31, 2024, from $20.9 billion as of December 31, 2023, resulting in an increase in investment income.
Previous wording
•The decrease in the asset base was primarily due to $2.4 billion of net run off in existing in force transactions and $2.6 billion associated with an in force retrocession transaction, partially offset by $2.1 billion from new transactions.
Current wording
•The increase in the asset base was primarily due to $3.3 billion from new transactions, partially offset by $1.8 billion of net run off in existing in force transactions and $0.4 billion associated with an external retrocession transaction.
Previous wording
•As of December 31, 2023 and 2022, $3.7 billion and $4.2 billion, respectively, of the invested assets were funds withheld at interest, of which greater than 90% was associated with two clients.
Current wording
•As of December 31, 2024 and 2023, $3.3 billion and $3.7 billion, respectively, of the invested assets were funds withheld at interest, of which greater than 90% was associated with two clients.
Previous wording
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.
Current wording
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, asset intensive and capital solutions.
Previous wording
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations in the Canadian dollar resulted in a $2 million decrease in income before income taxes in 2023. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Current wording
Foreign currency fluctuations can result in variances in the financial statement line items. Foreign currency fluctuations in the Canadian dollar resulted in a $3 million decrease in income before income taxes in 2024. Unless otherwise stated, all amounts discussed below are net of foreign currency fluctuations.
Previous wording
The increase in income before income taxes in 2023 was primarily due to favorable experience on longevity business in the Financial Solutions segment, an increase in investment related gains, net and lower operating expenses.
Current wording
The increase in adjusted operating income before income taxes in 2023 was primarily due to favorable experience on longevity business in the Financial Solutions segment, partially offset by the effects of unfavorable assumption updates in the Traditional segment.
Previous wording
•The increase in the loss ratio for 2023 was primarily due to future policy remeasurement losses as compared to future policy benefits remeasurement gains in 2022, primarily as a result of the 2023 assumption updates and unfavorable claims experience.
Current wording
•The decrease in the loss ratio for 2024 was primarily due to favorable experience on the group line of business and future policy remeasurement gains as compared to future policy benefits remeasurement losses in 2023.
Showing the first 40 of 114 pairs. Open the source sections for the rest.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
Valuation of Market Risk Benefits and Embedded Derivatives
Current report — wording carried from elsewhere
Year ended December 31, 2024, compared to the year ended December 31, 2023
Current report — wording carried from elsewhere
•Changes in the fair value of embedded derivatives;
Current report — wording carried from elsewhere
Year ended December 31, 2024, compared to the year ended December 31, 2023
Current report — wording carried from elsewhere
•Favorable claims experience in the U.S. and Latin America and Asia Traditional segment during 2023 and future policy benefits remeasurement gains. The unfavorable experience in the prior period, included in future policy benefits remeasurement (gains) losses, was primarily attributable to higher than expected claims as a result of COVID-19 incurred in the first quarter of 2022.
Current report — wording carried from elsewhere
•The increase in other operating expenses was primarily attributable to higher information technology and incentive compensation expense.
Current report — wording carried from elsewhere
See Note 17 – “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements for a table that presents the amounts for guarantees, by type, issued by the Company.
Current report — wording carried from elsewhere
Operational risk is the risk of lower/negative earnings and a potential reduction in enterprise value caused by unexpected losses associated with inadequacy or failure on the part of internal processes, people and systems, or from external events.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
Valuation of Market Risk Benefits and Derivatives
Previous report — wording carried elsewhere
The increase in income in 2023 was primarily the result of the following:
Previous report — wording carried elsewhere
•An increase in net investment income attributable to an increase in the average invested asset base and higher interest rates on new investments.
Previous report — wording carried elsewhere
As of December 31, 2023 and 2022, the amount of reinsurance assumed in Capital Solutions transactions, as measured by pre-tax statutory surplus, risk based capital and other financial structures was $25.5 billion and $25.7 billion, respectively.
Previous report — wording carried elsewhere
•The decrease in net investment income was primarily due to decreased variable investment income, partially offset by an increase in the invested asset base.
Previous report — wording carried elsewhere
•During 2023, the Company updated its assumptions which resulted in a future policy benefits remeasurement loss of $13 million due to updating mortality assumptions.
Previous report — wording carried elsewhere
Business Conduct and Governance Risk. Business conduct and governance is the risk related to management oversight, compliance, market conduct, and legal matters. The Company’s Compliance Risk Management Program facilitates a proactive evaluation of present and potential compliance risks associated with both local and enterprise-wide regulatory requirements as well as compliance with Company policies and procedures.